This preview shows page 1. Sign up to view the full content.
PS3
Fin 332
Chapter 5
(1)
Callaghan Motors’s bonds have 10 years remaining to maturity. Interest is paid
annually, the bonds have a $1,000 par value, and the coupon interest rate is 8%. The
bonds have a yield to maturity of 9%. What is the current market price of these bonds?
(2)
The Heymann Company’s bonds have 4 years remaining to maturity. Interest is paid
annually; the bonds have a $1,000 par value; and the coupon interest rate is 9%.
a) What is the yield to maturity at a current market price of (1) $829 or (2) $1,104?
b) Would you pay $829 for one of these bonds if you thought that the appropriate rate of
interest was 12 percent – that is, if rd = 12%? Explain your answer.
Chapter 8
(3)
Harrison Clothiers’ stock currently sells for $20 a share. The stock just paid a
dividend of $1.00 a share. The dividend is expected to grow at a constant rate of 10
percent a year. What stock price is expected 1 year from now? What is the required rate
of return on the company’s stock?
(4)
This is the end of the preview. Sign up
to
access the rest of the document.
This homework help was uploaded on 04/18/2008 for the course FIN 332 taught by Professor Dasilva during the Spring '08 term at CSU Fullerton.
 Spring '08
 DASILVA
 Interest, Interest Rate

Click to edit the document details