Question

1. What is the yield to maturity of a bond that pays 12% coupon rate with semi-annual coupon payments, has a par value of $1,000, matures in 9 years, and is currently selling for $897? a) 14.05% b) 11.90% c) 7.03% d) 12.97% 2. a company just paid a dividend of $1.25, and those dividends are expected to grow at a constant rate of 5% forever. If the required return of the investors is 11%, what is the stock price using the constant growth mode? a) $21.88 b) $16.41 c) $18.75 d) $12.36 The preferred stock of your company pays $1.5 quarterly dividends. If investors require 7.5% rate of return for these shares, what price should the preferred stock sell for? a) $80.00 b) $70.60 c) $63.16 d) $67.50 DEC

Answer 1

fRATE(H14,H16,-H20,H18)*2 Н24 F G 7 Q1 YTM Semi Annually: 8 COUPON RATE 12.00% 10 11 YEARS TO MATURITY 12 13 14 NPER 18 (years to maturity x 2) 15 60 (face value x coupon rate)/2 16 PMT 17 FACE VALUE $ 1,000.00 18 19 PRICE PV=| $897.00 20 21 22 RATE 7.03% RATE(18,60,-897,1000,0) 23 14.05% RATE (18,60,-897,1000,0) 2 YTM RATEX2 = 24 RATE(NPER,PMT,-PV, FV) 25 Answer A 26