FIN 571 week 2 problems

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

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University of Phoenix FIN/571 Week Two Assignment Carl R. Foster

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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
bond’s coupon rate is 7.4%. What is the fair value of this bond?

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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

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nds are expected to grow at a rate of 6% per year forever.  Assuming annual dividend payments, w stock is 10%?
what is the

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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%
the required return on James River preferred stock?

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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

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

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