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Fin 571 Week 4 Connect Problems

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FIN 571 Week 4 Connect Problems – Assignment

1. Microhard has issued a bond with the following characteristics:
Par: $1,000
Time to maturity: 11 years
Coupon rate: 9 percent
Semiannual payments
Calculate the price of this bond if the YTM is (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.):
Price of the Bond
a. 9 percent $ _____
b. 11 percent $ _____
c. 7 percent $ _____

2. Watters Umbrella Corp. issued 20-year bonds 2 years ago at a coupon rate of 8.4 percent. The bonds make semiannual payments. If these bonds currently sell for 90 percent of par value, what is the YTM? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
YTM _____ %

3. Grand Adventure Properties offers a 7 percent coupon bond with annual payments. The yield to maturity is 5.85 percent and the maturity date is 8 years from today. What is the market price of this bond if the face value is $1,000?
• $1,071.84
• $788.73
• $1,082.17
• $1,019.29
• $947.45

4. The next dividend payment by ECY, Inc., will be $1.64 per share. The dividends are anticipated to maintain a growth rate of 8 percent, forever. The stock currently sells for $31 per share.
What is the required return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Required return _____ %

5. The Starr Co. just paid a dividend of $1.55 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year, indefinitely. Investors require a return of 14 percent on the stock.
a. What is the current price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Current price $ _____
b. What will the price be in three years? (Do not round

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