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
Related questions
Question
- Suppose the following bond quote for IOU Corporation appears in the financial page of today’s newspaper. Assume the bond has a face value of $1,000, and the current date is April 19, 2022.
Company (Ticker) |
Coupon |
Maturity |
Last Price |
Last Yield |
Estimated Volume (000s) |
IOU (IOU) |
6.85 |
April 19, 2036 |
92.741 |
?? |
73 |
- What is the yield to maturity of the bond?
- What is the current yield?
- You purchase a bond with a coupon rate of 7.6 percent, a par value of $1,000, and a clean price of $910. If the next semiannual coupon payment is due in five months, what is the invoice price?
- Five Star Corporation will pay a dividend of $4.15 per share next year. The company pledges to increase its dividend by 6.25 percent per year, indefinitely. If you require a return of 9 percent on your investment, how much will you pay for the company’s stock today?
- Fegley, Incorporated, has an issue of
preferred stock outstanding that pays a $5.90 dividend every year, in perpetuity. If this issue currently sells for $80.55 per share, what is the required return?
- E-Eyes.com has a new issue of preferred stock it calls 20/20 preferred. The stock will pay a $20 dividend per year, but the first dividend will not be paid until 20 years from today. If you require a return of 8.75 percent on this stock, how much should you pay today?
- The stock price of Fujita Company is $53.70. Investors require a return of 15 percent on similar stocks. If the company plans to pay a dividend of $3.50 next year, what growth rate is expected for the company’s stock price?
- Premier, Incorporated, has an odd dividend policy. The company has just paid a dividend of $11.25 per share and has announced that it will increase the dividend by $9.25 per share for each of the next four years, and then never pay another dividend. If you require a return of 13 percent on the company’s stock, how much will you pay for a share today?
- McCabe Corporation is expected to pay the following dividends over the next four years: $5.40, $16.40, $21.40, and $3.20. Afterward, the company pledges to maintain a constant 6 percent growth rate in dividends forever. If the required return on the stock is 9 percent, what is the current share price?
- Synovec Corporation is growing quickly. Dividends are expected to grow at a rate of 32 percent for the next three years, with the growth rate falling off to a constant 6.2 percent, thereafter. If the required return is 14 percent and the company just paid a dividend of $2.85, what is the current share price?
- The Dahlia Flower Company has earnings of $1.44 per share.
- If the benchmark PE for the company is 13, how much will you pay for the stock?
- If the benchmark PE for the company is 16, how much will you pay for the stock?
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