Stocks and their valuation

1. Dividend, D₀ = $3.00; Rate of return, r = 10% Expected constant growth rate = 6%. What is the value of the common stock?

• $30

• $50

• $75

• $82.75

A 12-year bond has a 9 percent annual coupon, a yield to maturity of

8 percent, and a face value of $1,000. What is the price of the bond?

• $1,469

• $1,000

• $1,928

• $1,075

1. ABC has preferred stock with annual dividend of $7.50 per share. The required return is 6.5%, what is the selling price of ABC's preferred stock?

• $8.02

• $7.98

• $115.38

• $150.00

You intend to purchase a 10-year, $1,000 face value bond that pays interest of $60 every 6 months. If your nominal annual required rate of return is 10 percent with semiannual compounding, how much should you be willing to pay for this bond?

• $ 826.31

• $1,086.15

• $ 957.50

• $1,124.62

A 15-year bond with an 8 percent annual coupon has a face value of $1,000. The bond’s yield to maturity is 7 percent. What is the bond’s current yield?

• 3.33%

• 5.00%

• 7.33%

• 7.50%

Last year dividend was paid at $10. This year’s dividend increased by 5%. Dividend for the succeeding two years will be $12/share and $14/share. The required rate of return is 15%. How much is the value of the common stock?

• $30.63

• $27.41

• $42.36

• $42.94