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Semiannual Compounding, bonds, Securities; RRR, growth rate, common stock,

See attached file.

Use semiannual compounding on all bond problems unless otherwise indicated

1. Will you invest in a security that has a current price of $50, a growth rate of 6% and an expected dividend of $3.80 if your RRR is 12%?

2. Would you invest in the stock in #18 if your RRR was 8%? Would you invest in it if the price fell to $45 at your RRR of 8%?

3. List at least three rights commonly associated with holding shares of a security?

4. List two advantages and two disadvantages of having a long position (owning) a preferred security.

5. Price a share of common stock that paid a dividend of $2 one period ago and has a growth rate of 5% when your RRR is 10%.

6. What is the coupon yield on a $1,000 bond that is currently trading at 98, has two years before maturity and a YTM of 6%. The bond pays interest semiannually.

7. What is the investors' RRR on a 3% $30 par preferred stock selling for $33?

8. Price a 5-year $500 5% baby bond with a YTM of 7%. Use semiannual compounding.

9. What would happen to the YTM of the bond in question #25 if the price of the bond increased?

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Solution Summary

In Excel, the explanations and calculations are very well done to aid in understanding the problems.