1. Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 20 years to maturity, and a coupon rate of 7 percent paid annually.
If the yield to maturity is 8.1 percent, what is the current price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
2. A Japanese company has a bond outstanding that sells for 88 percent of its ¥100,000 par value. The bond has a coupon rate of 4.7 percent paid annually and matures in 18 years.
What is the yield to maturity of this bond? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
3. Suppose you know that a company's stock currently sells for $69 per share and the required return on the stock is 10 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. It's the company's policy to always maintain a constant growth rate in its dividends.
What is the current dividend per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
4. Gruber Corp. pays a constant $8.75 dividend on its stock. The company will maintain this dividend for the next 10 years and will then cease paying dividends forever. The required return on this stock is 12 percent.
What is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
5. The newspaper reported last week that Bennington Enterprises earned $34.07 million this year. The report also stated that the firm's return on equity is 16 percent. Bennington retains 75 percent of its earnings.
What is the firm's earnings growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
What will next year's earnings be? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.)