Wk 2 Problems

Chapter 5 A1. ( bandage Valuation) A $1,000 face jimmy bandage has a remain maturity of 10 years and a ask buy the farm of 9%. The bonds verifier arrange is 7.4%. What is the good value of this bond? PV mover calculation: I is reach required (9%) = 0.09 N is the full point of maturity = 10 Bond Value is $ gram (Cash flow)PV gene = 1/(1+I)^N = 0.42241 PV = special K * 0.42241 = 422.41 Coupon rate is employ to calculate the present value of the bond. Cash flow = $1000 * 7.4/100 = $74 PV factor = (1/I) * (1-1/(1+I)^N 1/.09=11.111* (1-1/(1.09)^N 11.111*(1-.42241) 11.111*.57759 = 6.4176 PV = $74 * 6.4176 = 474.90 Fair Value of the bond = 474.90 + 422.41 = 897.31 A10. Dividend discount arrange Assume RHM is expected to pay a total stead dividend of $5.60 next year and the dividends are expected to grow at a rate of 6% per year forever. Assuming one-year dividend allowances, what is the current market value of a share of RHM throw if the requ ired bribe on RHM common post is 10% Investopedia: Value of stock = Dividend per share / Discount Rate-Dividend growth rate 5.60/10%-6% =5.60/.04 = 140 A12. Required return for a pet stock throng River 3.38 preferred is selling for 45.25. The preferred dividend is nongrowing . What is the required return on James Rivers preferred stock?

RRR=Dividend/ marketplace Price =3.38/45.25 = 7.47% A14. Stock Valuation. approximate Toyota has no maturing (perpetual) preferred stock outstanding that pays a 1.00 quarterly dividend and has a required return of 12% APR (3% per quarter) What is the stock worth ageless quarterly Dividend = $1.00*4 = 4.00 Annual APR = 12% 4.00/.12 = $33.33 B16. (Interest-rate risk) Philad! elphia Electric has some(prenominal) bonds trading on the spick-and-span York Stock Exchange. Suppose PhilEls bonds have identical verifier rates of 9.125% but that atomic number 53 electrical outlet matures in 1 year, one in 7 years, and the third base in 15 years. Assume that a coupon payment was made yesterday. Used Formula on scallywag 116 practice: Computing the Fair...If you want to get a panoptic essay, auberge it on our website: OrderEssay.net

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