Question 1. Valuation - zero-coupon bond
A U.S. Government bond with a face amount of $10,000 with 8 years to maturity is yielding 3.5%. What is the current selling price?
Question 2. Valuation - options
The following information refers to a six-month call option on the stock of XYZ, Inc.
Price of the underlying stock: $50
Strike price of the three-month call: $45
Market price of the option: $10
a) What is the intrinsic value of the option?
b) What is the option's time premium at this price?
Question 3. Valuation - corporate bond
A $1,000 corporate bond with 20 years to maturity pays a coupon of 7% (semi-annual) and the market required rate of return is a) 6.6% b) 13%. What is the current selling price for a) and b)?
Question 4. Valuation - Constant growth - common stock.
What is the value of a share of common stock that paid $2.00 last year, the growth rate is 8%. Assume the risk free rate is 4%, the market return is 10% and the Beta is 1.5.
Question 5. Valuation - preferred stock
What is the value of a share of preferred stock that pays a $9.50 dividend? Assume k is 12%.