Question -
Q1- An investor is looking to buy stock in Company XYZ. The earnings in the last year were $9.50 a share and expected to grow 3% a year for the upcoming 5 years. The current return on benchmark investments is 11%. Using the Capital Asset Pricing Model what is the stock value for XYZ Company?
Q2- Company XYZ is currently trading at $34.66 a share. The current dividend is $2.57 a share and the expected growth rate is 5.6%. Using the Constant Growth Model what would be the Required Return rate?
Q3- An investor is looking to buy a bond that currently pays $155 a year in interest (coupon rate). The current yield is 11% and the face value is $1,000. How much will the investor have to pay for this bond?