Question 1: (Bond valuation) A $1,000 face value bond has a remaining maturity of 10 years and a required return of 9%. The bond's coupon rate is 7.4%. What is the fair value of this bond?
Question 2: (Yield to maturity) New Jersey Lighting has a 7% coupon bond maturing in 17 years. The current market price of the bond is $975. What is the bond's yield to maturity?
Question 3: (Constant growth model)
a. The current dividend for Birmingham Electric is $2.40 and is growing at 5% annually. If the required return is 13%, what is the value of one share of stock?
Question 4: (Realized return) Tie Su bought $5,000 worth of stock 22 months ago. The firm has paid no dividends since he bought the stock. The stock is currently worth $5,680. What is Tie's realized APY?
Question 5: (Required return) According to the CAPM, what would be the required return on an asset that has a beta of 1.35 when the expected return on the market portfolio is 12% and the riskless return is 7%?