#10 help please. a) Simple 12 percent interest with a 15 percent compensating ba
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#10 help please.
a) Simple 12 percent interest with a 15 percent compensating balance b) Discounted interest, with no compensating balance 9) The Federal Motors Company has a $1,000 par value bond outstanding that pays 8 percent annual interest. The current yield to maturity on such bonds in the market is 10 percent. Compute the price of the bonds for these maturity dates a) 20 years. b) 10 years 10) BMT Corporation recently issued preferred stock with a par value of $60 that pays a 7.5% annual dividend. If the stock currently yields 10%, what is its market value (price)? 1) AWM Corporation expects its common stock dividend to grow at a constant 5 percent for e foreseeable future. The company recently paid a $4.00 dividend. If the required rate of turn on the company's stock is 11 percent, what is the value (price) of the stock today?Explanation / Answer
STEP 1: FORMULA Market Value of Preferred Stock = Preferred Dividend / Required Return of Prefreed Stock STEP 2: CALCULATION OF THE RATIO Preferred Dividend = $ 60 X 7.5% = $ 4.50 Required Return = Current Yield = 10% or 0.10 Market Value of Preferred Stock = Preferred Dividend $ 5 Divide By "/" By Current Yield $ 0.10 Market Value of Preferred Stock = $ 45.00 STEP 3: ANSWER Market Value of Preferred Stock = $ 45
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