Assignment:
Based on the information provided below, compute the value of a bond and the value of common stock.
1.Suppose you have a $1,000 face value bond with 12 years to maturity, a coupon rate of 6% and a yield to maturity of 8%. If the bond makes semiannual payments, what is it's price today?
(Hint: www.accountingcoach.com/online-accounting-course/89Xpg07.html )
2. Compute the Value of Acme Common Stock if the next dividend is expected to be $1.20 per share. Investors require a 9% rate of return on stocks with the same risk as Acme. Based on the dividend growth model, what is Acme's stock worth today?