Question 1: Assume you hold a corporate bond with a $1,000 par value paying a 7 ⅝ coupon rate that has two years left until maturity. Calculate the value of the bond if the current market interest rate on a bond of this risk is 9 %.
Question 2: Assume that you hold a share of common stock that will pay a dividend of $5.00 per share for the next three years. At the end of the third year, you expect the price per share to be $50. Calculate the value of the stock if your required rate of return is 11 %.
Question 3: Calculate the price of a share of stock that is expected to pay a $15 dividend in perpetuity if the stock is priced to yield an 11.5% rate of return.