Subject: Business    / Finance
Question

1.

Douglas bonds mature in 10 years and have an annual coupon rate of 10.5 percent with semiannual payments. The $1,000 par value bond currently trades at $1,105 in the market.Compute the annual yield to maturity on the Douglas bond(Round the final answer to 2 decimal places.)

2.

B2Y Solutions has preferred shares outstanding that pay an annual dividend of $3, payable quarterly. Each has a price of $75.00.

What is the required rate of return (yield) on the preferred stock?(Round the final answer to 2 decimal places.)

3.

Triple Peaks Playhouse will pay a quarterly dividend of $0.75 at the end of the next quarter. It has common share price of $40.00 and a constant growth rate of 4 percent.

Compute the required rate of return.(Round the final answer to 2 decimal places.)

4.

What is the value of a common share that has just paid a dividend of $2.25, is expecting an indefinite annual growth rate of 5 percent, and requires a return of 17 percent based on perceived market risks?(Round the final answer to 2 decimal places.)

5.

Waterman Company has had a fantastic growth of 22 percent per year, but this growth rate is expected to fall to 6 percent in the near future and then continue at that rate for a long time. Shareholders expect a 17 percent annual rate of return and a dividend of $0.75 next year.

What is the share price of Waterman’s common stock?(Round the final answer to 2 decimal places.)

6.

A national financial institution is currently offering $50,000 a year for life as a special promotion. Current inflation is 2 percent a year, and the real rate of return is assumed to be 3 percent. One could suggest that this financial institution would receive a 2 percent premium for the risk inherent in its long-term investments.Assuming you will live forever, how much will this promise cost the financial institution today when you win? (Round the final answer to the nearest whole dollar.)

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