A CBS bond with a par value of $1000, an interest rate of 7.625%, and a maturity

Question

A CBS bond with a par value of $1000, an interest rate of 7.625%, and a maturity of 10 years. The bond is selling for $986. Required rate 6%
Alabama Power Company preferred stock with a $50 par value and a dividend of $2.8125 per year. The stock is currently trading at $39 per share. Required rate of 7 %
Emerson Electric common stock that is selling for $80 with a par value of $5. This stock recently paid a $2.10 dividend, and the firm's earnings per share have increased from $2.40 to $4.48 in the past 5 years. An equivalent amount of growth in the dividend is expected. Required rate of 15%

Calculate the value of each investment.

Explanation / Answer

a)

Bond

Par $1,000.00
IR 7.625%
Maturity 10
Price $ 986.00
Required Rate of Return 6.00%
Value to You $1,120.88 Use a financial calculator to determine PV

Note I assumed semi-annual pmts

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