Question 1
A bond has a face value of $1000 with a time to maturity ten years from now. The yield to maturity of the bond now is 10%.
a) What is the price of the bond today, if it pays no coupons?
b) What is the price of the bond if it pays annual coupons of 10%?
c) What is the price today if pays 8% coupon rate semi-annually?
Question 2
a) What is the value today of a $1000 bond, 8% coupon with annual coupon payments if the time to mature is 2 years and YTM is 4%?
Question 3
SalesTech is a constant growth company whose last dividend (D0, which was paid yesterday) was $2.00 and whose dividend is expected to grow indefinitely at a 6% rate. Find the share price.
Question 4
What is the impact on the estimated stock price if g falls to 5% or rises to 7%? If rs changes to 12%% or to 14%?
Question 5.
XYZCo is reinvesting 70% of its earnings in projects that provide a ROE of 9%.
The expected return on similar risky projects is 14% on the stock market. Given the present policy of the firm its year-end dividend is now $3 per share.
a) At what price will the stock sell?
b) What is the present value of the growth opportunities for XYZ Co?