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Bond and Preferred Stock

49. What is the yield to maturity, to the nearest percent, for the following bond: current price is $908, coupon rate is 11 percent, $1,000 par value, interest paid annually, eight years to maturity?
(a) 11 percent
(b) 12 percent
(c) 13 percent
(d) 14 percent

50. What is the current price of a $1,000 par value bond maturing in 12 years with a coupon rate of 14 percent, paid semiannually, that has a YTM of 13 percent?
(a) $604
(b) $1,090
(c) $1,060
(d) $1,073

51. A firm has issued cumulative preferred stock with a $100 par value and a 12 percent annual dividend. For the past two years, the board of directors has decided not to pay a dividend. The preferred stockholders must be paid _________ prior to paying the common stockholders.
(a) $ 0/share
(b) $12/share
(c) $24/share
(d) $36/share

Solution Preview

49. The YTM is the discounting rate that will make the PV of interest and principal equal to price today
908 = 110 X PVIFA (8, ytm%) + 1,000 X PVIF (8,ytm%)
This ...

Solution Summary

The solution explains the calculation of yield to maturity and price of a bond and the dividend calculations for preferred stock.