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)
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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.