Problem 1: What is the price of a bond that has the following characteristics: (a) Years until maturity: 20, (b) Coupon Payments: $50.00, and (c) Rate: 6%.
Problem 2: Is the bond from Problem 5 selling at a: (a) discount to par, (b) premium to par, or (c) par value.
Problem 3: What is the price of a bond that pays semi-annual coupon payments and has the following characteristics: (a) Years until maturity: 10, (b) Annual coupon payment: $90, and (c) Annual interest rate: 10%.
Problem 4: What is the market rate of interest for a bond that has the following characteristics: (a) Price: $890.00, (b) Coupon: $75.00, and (c) Number of years until maturity: 10?
Problem 5: Calculate the price that you would be willing to pay for the following 'no growth' stock that has the following characteristics: (a) Annual Dividend--$2.50 and (b) Investor's required rate of return-10%.
Problem 6: Calculate the price that you would be willing to pay for the following 'constant growth' stock that has the following characteristics: (a) Annual Dividend-$2.50, (b) Constant Growth Rate-8%, and (c) Investor's required rate of return-10%.
Problem 7: Company XYZ is expected to generate a super-normal growth rate of 20% for the next three years and then grow at 6% indefinitely. If the latest dividend payment was $1.50 and you, as an investor, require a 12% rate of return on this investment, what is the maximum value that you would pay for XYZ's stock?