1) A $1000 par value bond was issued 25 years ago at a 12% coupon rate. It currently has 10 years to maturity. Interest is paid annually. What would the price of the bond be today if interest rates were currently 8%? 14%?
2) ABC Company's most recent stock dividend is $3.00. The firm's management feels that dividends will remain level for the foreseeable future. If the required rate of return is 15% , what is the value of the stock? what would the value be at 20% required rate of return?
3) XYZ paid a dividend of $2.00 per share last year. The company expects earnings & dividends to grow at a rate of 10% per year. What required rate of return would result in a stock price of $50 this year?
4) A firms' has paid the following dividends:
Year Dividend
2001 5.10
2000 4.76
1999 4.47
1998 4.22
1997 4.00
The firm expects the dividend growth rate to be consistent with prior years's growth.
If you require a return of 15% , what is the most you would pay per share in 2002.
5) A $1,000 bond was issued in the year 2000 at a rate of 7%. The bond's maturity was 20 years. What is the most you would pay for the bond in 2012 if bonds of similar risk were yielding a return of 5%?
6) ABC pays a dividend of $3.00 per share. The Dividend is expected to grow at a rate of 8%. If you plan to purchase the stock next year, what required rate of return would result in a stock price of $25?