Question 1
Dan is going to buy a 19-year bond that pays a coupon rate of 11.56% per year, and has a $1,000 par value. The bond currently priced at $1,326.92? What is the yield to maturity of this bond? Assume annual coupon payments.
Question 2
Try to determine the required rate of return on Mary Farm Corporation's common stock. The firm's beta is 1.6. The rate on a 10-year treasury bond is 2.38 percent, and the market return is 8.06 percent.
Question 3
You hold a portfolio with the following securities:
|
Security
|
Percent of portfolio
|
Beta
|
|
Stock A
|
23%
|
1.50
|
|
Stock B
|
48%
|
1.32
|
|
Stock C
|
29%
|
1.87
|
Calculate the beta portfolio.
Question 4
Calculate the expected return on stock:
|
State of the economy
|
Probability of the state
|
Percentage returns on stock
|
|
Economic recession
|
25%
|
-8.5%
|
|
Boom
|
12%
|
15.6%
|
|
Steady economic growth
|
63%
|
3.4%
|
Question 5
The Black Bear Company just paid an annual dividend of $5.98. If you expect a constant growth rate of 8% percent, and have a required rate of return of 12.65 percent, what is the current stock price according to the constant growth dividend model (Gordon model)?
Question 6
You are considering the purchase of a share of Blue Grass, Inc. common stock. You expect to sell it at the end of one year for $87 per share. You will also receive a dividend of $5.36 per share at the end of the next year. If your required return on this stock is 7.39 percent, what is the most you would be willing to pay for Blue Grass, Inc. common stock now?
Question 7
What is the value of a bond that has a par value of $1,000, a coupon rate of 17.24 percent (paid annually), and that matures in 8 years? Assume a required rate of return on this bond is 13.53 percent.
Question 8
General Mills has a $1,000 par value, 12-year bond outstanding with an annual coupon rate of 3.60 percent per year, paid semiannually. Market interest rates on similar bonds are 12.70 percent. Calculate the bond's price today.
Question 9
Black Water Corp. just issued zero-coupon bonds with a par value of $1,000. The bond has a maturity of 25 years and a yield to maturity of 8.29 percent, compounded semi- annually. What is the current price of the bond?
Question 10
What is the yield to maturity of a 23-year bond that pays a coupon rate of 8.25% per year, has a $1,000 par value, and is currently priced at $1,298.05? Assume semi-annual coupon payments.