1. Common Products has issued its $.0001 par value stock in three separate financing transactions. First, ten years ago, the founder of the company purchased 1,000,000 shares of stock for $50,000.Second, five years ago, the company sold 500,000 shares to a venture capitalist for $2,000,000. Third, the company went public last year by issuing2,000,000 shares of stock to the public for $24 million. Use this information to fill in thefollowing table: Common shares (par value)____________________ Additional paid-in capital____________________ Retained Earnings ____________________Net Equity $28,500,000
2. A $1,000 face value bond of Acme Inc. pays an annual coupon, carries a coupon rate of 7.25%, has 31 years to maturity, and sells at a yield to maturity of 6.45%. (a) What interest payments do bondholders receive each year?(b) At what price does the bond sell? (c) What is the bond price if the yield to maturity increases to 8%?
3. A 20 year maturity bond with a coupon rate of 6.5% and face value of $1,000 makes semi-annual coupon payments. What is the bond’s yield to maturity if the bond is selling for: (a) 900? (b) 1,000?