1.Debt holders: a .are the residual owners of a corporation. b. have little say
ID: 2759696 • Letter: 1
Question
1.Debt holders:
a .are the residual owners of a corporation.
b. have little say in how the firm conducts its business.
c. cannot force the firm into bankruptcy court if it fails to make the scheduled interest and principal payments on time.
d. are willing to accept more risk than the stockholders in the corporation.
2. A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 6.4%. What is the stock's current price?
a. $17.39
b. $17.84
c. $18.29
d. $18.75
3. Nathan Akpan is planning to invest in a seven-year bond that pays annual coupons at a rate of 7 percent. It is currently selling at $927.23. What is the current market yield on such bonds? (Round to the closest answer.)
a. 10.4%
b. 9.5%
c. 8.4%
d. 7.5%
4. Netflix issued five-year bonds that pay a coupon of 6.375 percent annually. The current market rate for similar bonds is 8.5 percent. How much will you be willing to pay for Netflix bond today? Round to the nearest dollar.
a. $1,023
b. $1,137
c. $916
d. $897
Explanation / Answer
1. Debt holders are the individuals who lens money in exchange of the debentures. They are the owners of the bonds.
The correct option is
b. have little say in how the firm conducts its business.
2 Price = Dividend at year 1/ Return- Growth .75/.105-.064 .75/.041 Price = $18.29 The correct option is C. $ 18.29 3 Current Market Yield = Coupon/ Price 1000*7%/927.23 70/927.23 7.50% The correct option is d. 7.5%Related Questions
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