Problem 1. What is the constant growth stock? How are constant growth stocks valued?
Problem 2. Indicate whether each of the following actions will increase or decrease a bond's yield to maturity:
a. A bond's price increases.
b. The company's bonds are downgraded by the rating agencies.
c. A change in the bankruptcy code makes it more difficult for bondholders to receive payments in the event a firm declares bankruptcy.
d. The economy enters a recession.
e. The bonds become subordinated to another debt issue.