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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Question
Q No. 1 Explain why you agree or disagree with the following statements. The answer should not be more than 3 sentences.
- Treasury bonds are riskier than corporate bonds.
- All other things held constant; the
future value of an ordinaryannuity is always having a higher future value than annuity due. - All other things held constant, the price or interest rate risk of short-term bond is always lower than long-term bond.
Q No. 2 Being a newly appointed analyst at Credit Suisse, one of your prime role is to facilitate the Global head of valuations in providing detailed and timely analysis. The next meeting is being scheduled for the upcoming Saturday, and you are required to calculate the price of a few stocks and provide their valuations. The information is mentioned below:
- What would be the expected price of Travelers stock today, given the streams of future dividends of $4 for next 3 years, having ZERO growth rate, and 10% required
rate of return ? - The Walgreens Boots Alliance Company has recently paid dividend D0 = $3, and growth is expected to remain 5% throughout. The required rate of return is 10%. Calculate dividend streams for the next 2 years, and their PVs?
- You have
forecasted NIKE dividends of $5, $5.70, and $5.95 over the next three years respectively. After the end of three years the anticipated selling market price of NIKE will be $135. What is NIKE stock price provided a 7% expected rate of return?
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