1. In what case will using dividends expected to be paid to shareholders yield the same valuation for the firm as using free cash flows expected to be generated by the firm?
2. You purchased a bond today with a face value of $100,000. It pays coupons semiannually at an annual rate of 8%. It matures in 7 years and has an annual YTM of 5%. What is the duration of the bond?
3. A bond with a maturity of 30 years has a coupon rate of 8% (paid annually) and a yield to maturity of 9%. Its price is $897.26 and its duration is 11.37 years. What will happen to the bond price if the bond’s yield to maturity increases to 9.1%?