1. What would be the roughly price of a $1000 par value bond that pays $50 annual interest and has 15 years to maturity if the yield on similar bonds is 8%?
2. A 10 year, $1000 par value bond pays 8% annual interest. Complete this chart:
YTM Price of Bond
5%
7%
8%
10%
12%
3. What is the price of a zero coupon bond that has a par value of $1000 and 8 years to maturity if the yield on similar bonds is 5%?
4. What is the price of a $1000 par value bond, 2 years from now, with a 6% coupon rate paid semi-annually if the bond has 7 years to maturity and the YTM on similar bonds is 8% annually?
5. What is the current yield of a bond that pays 10% annual interest and has a price of $850?
6. Matt Inc, just paid a $2 annual dividend on its common stock. The dividend is expected to increase at 6% per year indefinitely. If the required rate of return is 18%, what is the value of the stock today?
7. Sam’s Co. next annual dividend is expected to be $7. The growth rate in dividends over the following three years is forecasted at 15%. After that, the growth rate is expected to equal the industry average of 5%, if the required rate of return is 16%, What is the price of the stock after one year?
8. Explain stock market and ups & downs of stock price.
9. We look at the balance sheet when we are deciding on what long-term investments should the firm engaged in. Explain the items we look at in the balance sheet.
10. Explain why debt and equity are important for corporate finance.