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A1. (Bond valuation) A $1,000 face value bond has a remaining maturity of 10 years and a
required return of 9%. The bond's coupon rate is 7.4%. What is the fair value of this bond?

A5. (Yield to maturity) New Jersey Lighting has a 7% coupon bond maturing in 17 years. The
current market price of the bond is $975. What is the bond's yield to maturity?

B19. (Constant growth model)
a. The current dividend for Birmingham Electric is $2.40 and is growing at 5% annually.
If the required return is 13%, what is the value of one share of stock?

A1. (Realized return) Tie Su bought $5,000 worth of stock 22 months ago. The firm has paid
no dividends since he bought the stock. The stock is currently worth $5,680. What is Tie's
realized APY?

A5. (Required return) According to the CAPM, what would be the required return on an asset
that has a beta of 1.35 when the expected return on the market portfolio is 12% and the
riskless return is 7%?

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The solution explains some questions relating to Bond valuation, YTM, Constant growth model, realized return and required return

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