1.) Compute the market value of a 9% coupon bond with 7 years left to maturity i
ID: 2700064 • Letter: 1
Question
1.) Compute the market value of a 9% coupon bond with 7 years left to maturity if the current required rate for this type of bond is 8%
2.) Compute the market value of a zero coupon bond with 10 years left to maturity with a required rate of return of 9%
3.) Compute the market value of a non-participation preferred stock with an annual dividend of $4 and investors required rate of return of 8%
4.) Compute the market value of a $1000 bond, which pays $75 interest per year, has a maturity rate of 7 years and is selling to yield investors 8%
5.) What is the current market value of a firm's common stock if the future expected annual dividend is $4.50 and the expected growth rate is 6%, if the market rate of investors is 15% for this stock?
6.) What is the market value of a 15 year AAA bond which pays 8% annual interest if the current investors required rate is 7%?
7.) If a 25 year old college graduate desires to have $1,000,000 in her investment portfolio at the age of 45, what annual investment is required if the portfolio expects to earn 11% per year? What if she decides that age 55 is more practical, what annual investment is required?
8.) If ZZ corportation pays a $3.00 dividend on its nonparticipating preferred stock, what is the current price if investors require a 6.5% return?
Thanks!
Explanation / Answer
a) taking par value = 1000 IF NOT MENTIONED
we get PV = 90 /.08 *(1-1/1.08^7) + 1000/1.08^7 =1052.0637
b) 1000 / 1.09^10422.4108
c) 4 / 0.08 = 50
d)75/.08 *(1-1/1.08^7) + 1000 /1.08^7 = 973.968
5) 4.5 / ( 0.15 - 0.06 ) = 50
6) 80/.07 *(1-1/1.07^15) + 1000/1.07^15 =1091 .0794
7)1000000 = FV /0 .11 *(1-1/1.11^20 ) IMPLIES FV =125575.6369
IF 55 REPLACE (1.11^20 BY 1.11^30 ) SO FV = 131311.7091
8) 3 / 0.065 = 46.15
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