1. Addison Company will issue a zero coupon bond this coming month. The projected yield for the bond is 7%. If the par value of the bond is $1,000, what is the price of the bond using a semiannual convention if a. The maturity is 20 years? b. The maturity is 30 years?
2. A stock a stock is expected to grow at a rate of 30% for the next 3 years. It is then expected to grow at 20% annually for the next 2 years before settling down to a normal growth rate of 8%. The company just paid a $2.00 dividend. Treasury bills yield 5% and the return on market is 10%. The beta for the firm is estimated at 1.5. What is the value of the stock today?