Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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I'm having trouble with how to solve the questions below, the appropriate formulas to use. Thanks in advance for any help!
Transcribed Image Text:A. What is the value of a 5%, $1,000 face value bond that matures is 11 years if
investors require a 5% return on their investment?
B. What will be the price of a 4.6%, $1,000 face value bond seven years from
today if the bond matures in 21 years and the going rate of interest for such
bonds is 7%?
C. What is the value of a $1,000 zero-coupon bond that matures in 26 years
when the required rate of return is 11%?
D. What is the yield-to-maturity of a $1,000 bond with a coupon rate of 4%, a
20 year maturity, and a current price of $1,240?
E. What is the price of one share of 6% preferred stock that has a par value of
$50 while investors have a required rate of return of 9%?
F. What is the required rate of return on a $7 preferred stock with a market
price of $67 and a par value of $50?
G. Using the dividend growth model, what is the value of one share of a
common stock that paid a dividend of $3.10 yesterday when investors require a
9% return on their investment and who perceive that dividends will grow at 5%
per year for the foreseeable future?
H. What is a stock's total rate of return if it sells for $60 in the market, paid a
dividend of $3.21 yesterday, and investors anticipate the company's dividend
will grow at 4% for the foreseeable future?
I. Assuming a stock sells for $71 and paid a $2 dividend yesterday, what is the
stock's capital gains yield if it's dividends are expected to grow at 5.5% each year
for the foreseeable future?
J. What is a stock's total rate of return if it paid a dividend of $4 yesterday, sells
for $39, and investers feel that dividends will grow at 6% per year for the
foreseeable future?
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