Question 42 Etling Inc.\'s dividend is expected to grow at 7.5% for the next two

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Question 42

Etling Inc.'s dividend is expected to grow at 7.5% for the next two years and then at 3% forever. If the current dividend is $3 and the required return is 16%, what is the price of the stock?

Select one:

a. $25.77

b. $26.00

c. $29.45

d. $25.10

e. $25.54

Question 43

What is the market value of a bond that will pay a total of 19 annual coupons of $100 each over the remainder of its life? Assume the bond has a $1,000 face value and an 8%/year yield to maturity.

Select one:

a. $1,135.90

b. $1,196.36

c. $642.26

d. $1,192.07

e. $634.86

Question 44

If you are borrowing money, which one of the following rates would you prefer?

Select one:

a. 9% compounded semi-annually

b. 9% compounded daily

c. 9% paid annually

d. 9% compounded monthly

e. 9% compounded quarterly

Question 45

The purchase and sale of securities after the original issuance occurs in the:

Select one:

a. Liquidation market.

b. Auction market.

c. Secondary market.

d. Primary market.

e. Dealer market.

Explanation / Answer

42.

what is the price of the stock

=(3*(1+7.5%))/(1+16%)^1+(3*(1+7.5%)^2)/(1+16%)^2+((3*(1+7.5%)^2*1.03)/(16%-3%))/(1+16%)^2

=25.77

43.

What is the market value of a bond

=100*((1-(1+8%)^(-19))/8%)+1000/(1+8%)^19

=1192.07

44.

c. 9% paid annually

because other will have higher than 9% rate because of more than 1 compounding periods in a year.

45.

Secondary market.

because trading takes place in the secondary market.

the above are answer....

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