1. Ryngaert Inc. recently issued noncallable bonds that mature in 15 years. They have a par value of $1,000 and an annual coupon of 5.7%. If the current market interest rate is 9.7%, at what price should the bonds sell?
2. The Francis Company is expected to pay a dividend of D = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company's beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the company's current stock price?
3. McCue Inc.'s bonds currently sell for $1,100. They pay a $90 annual coupon, have a 25-year maturity, and a $1,000 par value, but they can be called in 5 years at $1,050. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. What is the difference between this bond's YTM and its YTC?
4. Suppose the yield on a 10-year T-bond is currently 5.05% and that on a 10-year Treasury Inflation Protected Security (TIPS) is 2.85%. Suppose further that the MRP on a 10-year T-bond is 0.90%, that no MRP is required on a TIPS, and that no liquidity premium is required on any T-bond. Given this information, what is the expected rate of inflation over the next 10 years? Disregard cross-product terms, i.e., if averaging is required, use the arithmetic average
5. Ten years ago, Lucas Inc. earned $0.50 per share. Its earnings this year were $6.20. What was the growth rate in earnings per share (EPS) over the 10-year period?© BrainMass Inc. brainmass.com June 4, 2020, 12:23 am ad1c9bdddf
The problem deals with determining the share value, price of bond, yield to call of a bond.