1. Determine the yield to maturity (to the nearest tenth of 1 percent) of an 8-year zero coupon bond ($1,000 par value) that is currently selling for $521.

2. A WPI 10s 08 bond closed at 89. What is the current yield on this bond?

3. The earnings and dividends of MicroSun Computer Co. are expected to grow at an annual rate of 15 percent over the next 4 years and then slow to a constant growth rate of 8 percent per year. MicroSun currently pays a dividend of $0.50 per share. What is the value of MicroSun stock to an investor who requires a 14 percent rate of return?

4. What is the current value of a share of Chyrox if its current dividend is $1.50 and dividends are expected to grow at an annual rate of 20 percent for the next 5 years? Assume the investor has a required rate of return of 15 percent and expects to sell the security in 5 years for $72.

5. HDTV has planned on diversifying into the dual-VCR field. As a result, HDTV's beta would rise to 1.6 from 1.2 and the expected future long-term growth rate in the firm's earnings would increase from 12% to 16%. The expected market return, km, is 14%; the risk free rate, rf, is 7%; and the current dividend, Do, is $0.50. Should HDTV go into the dual-VCR field?

6. Richtex Brick has a current dividend of $1.70 and the market value of its common stock is $28. The expected market return is 13 percent and the risk-free rate is 9 percent. If Richtex stock is half as volatile as the market, and the market is in equilibrium, what rate of growth is expected for Richtex's dividends assuming a constant growth valuation model is appropriate for Richtex?

Solution Summary

The solution computes current yield, yield to maturity for bond. It also provides an example to compute value of stock by using constant growth valuation model .

A bond has the following terms:
Annual interest $100
Term 15 years
Principal $1,000
a. What is the current price of the bond if comparable yields are 7 percent?
b. What are the currentyield and yield to maturity given the price of the bond in the previous question?
c. If you expect the b

Martin Software has 9.4 percent coupon bonds on the market with 19 years to maturity. The bonds make semi-annual payments and currently sell for 107.5 percent of par.
a. What is the currentyield on the bonds?
b. What is the YTM?
c. What is the effective annual yield?

Charlotte's Clothing issued a 5 percent bond with a maturity date of 15 years. Five years have passed and the bond is selling for $690.
(a)What is the currentyield?
(b) What id the yeild to maturity?
If five years later the yield to maturity is 10 percent, what will be the price of the bond?

Assume coupons are paid annually. Here are the prices of three bonds with 10-year maturities:
Bond Coupon (%) Price (%)
2 81.62
4 98.39
8 133.42
________________________________________
a. What is the yield to maturity fo

1. What terms (or inputs) are needed to calculate yield to maturity (YTM)? How does this compare to calculating yield to call (YTC)?
2. Provide the steps taken to calculate YTM using a calculator or MS Excel.
3. Calculate Problem 7-2, at the end of Chapter 7 in your text, Fundamentals of Financial Management, and show yo

1. BondYields. A bond with par value $1,000 has a currentyield of 7.5 percent and a coupon rate of 8 percent. What is the bond's price?
2. Coupon Rate. General Matter's outstanding bond issue has a coupon rate of 10 percent and a currentyield of 9.6 percent, and it sells at a yield to maturity of 9.25 percent. The firm w

Apple has 8% coupon bonds on the market with 18 years to maturity. The bonds make semiannual payments and currently sell for 93% of par, or $930. Compute:
1. The CurrentYield
2. The Yield to Maturity
What is the difference between these two?

A thirty year zero bond has a par value of $1000 and sells for $356.27 on the open market. The YTM of this bond is?
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Assume that the Financial Management Corporation's $1,000-par-value bond had a 5.700% coupon, matured on May 15, 2017, had a current price quote of 97.708, and had a yield to maturity (YTM) of 6.034%. Given this information, answer the following questions.
a. What was the dollar price of the bond?
b. What is the bond's curr

1. You are considering the purchase of a 7%, 15-year bond that pays interest annually. If the yield to maturity on the bond is 6%, what price will you pay? Round your answer to the nearest cent.
2. What is the currentyield on the bond from part a? Round your answer to the nearest tenth