FIN 571 week 2 problems

FIN 571 week 2 problems - UniversityofPhoenix FIN/571...

Info iconThis preview shows pages 1–12. Sign up to view the full content.

View Full Document Right Arrow Icon
University of Phoenix FIN/571 Week Two Assignment Carl R. Foster
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
A $1,000 face value bond has a remaining maturity of 10 years and a  required return of 9%. The Applying PV function Rate 0.09 N 10 PMT 74 FV 1000 Fair Value of Bond $897.32  Using coupon rate to calculate PV of annuity Cash Flow Cash flow =  $1000*7.4/100 = $74 PV factor = (1/i)*(1-1/(1+i)^n = 6.4176 PV factor = 1/(1+i)^n = .422.41 PV = $1000*.422.41 =  422.41 PV = $74*6.4176 =  474.9024 Fair value of Bond = 474.9024 + 422.41 =  897.32
Background image of page 2
 bond’s coupon rate is 7.4%. What is the fair value of this bond?
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
Dividend  D1 $5.60  r 0.1 g (rate of growth) 0.06 Po (current market value) = D1/(r-g) =  $140.00  Assume Company XYZ is expected to pay a total cash dividend of $5.60 next year and its dividen current market value of a share of Company XYZ's stock if the required return on XYZ common s
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
nds are expected to grow at a rate of 6% per year forever.  Assuming annual dividend payments, w stock is 10%?
Background image of page 6
 what is the 
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
James River $3.38 preferred is selling for $45.25. The preferred dividend is nongrowing. What is  D (Dividend) $3.38  P (Price) $45.25  Required return = D/P = 0.07 7.45%
Background image of page 8
 the required return on James River preferred stock?
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 10
a. If the yield to maturity for all three bonds is 8%, what is the fair price of each bond? b. Suppose that the yield to maturity for all of these bonds changed instantaneously to 7%.  Wha
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 12
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 25

FIN 571 week 2 problems - UniversityofPhoenix FIN/571...

This preview shows document pages 1 - 12. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online