Problem 1. Valuation - corporate bond
A $1,000 corporate bond with 10 years to maturity pays a coupon of 8% (semi-annual) and the market required rate of return is a) 7.2% and b) 10%. What is the current selling price for a) and b)?
Problem 2. Valuation - options
The following information refers to a six-month call option on the stock of XYZ, Inc.
• Price of the underlying stock: $50.
• Strike price of the three-month call: $45.
• Market price of the option: $10.
a) What is the intrinsic value of the option?
b) What is the option's time premium at this price?
Problem 3. Valuation - zero-coupon bond
A U.S. Government bond with a face amount of $10,000 with 13 years to maturity is yielding 5.5%. What is the current selling price?
Problem 4. A share of stock is currently selling for $31.80. If the anticipated constant growth rate for dividends is 6% and investors are seeking a 16% return, what is the dividend just paid?
Problem 5. A $1000 value convertible bond with conversion price of $50. It sells for $1,120 despite the fact bond's coupon ate and the market rate are equal. The common stock acquired upon conversion is selling for $54 per share. What is the convertible bond's conversion premium?