# B what relationship exists between the coupon

• Homework Help
• cw725
• 9
• 92% (65) 60 out of 65 people found this document helpful

This preview shows page 5 - 7 out of 9 pages.

b.What relationship exists between the coupon interest rate and yield to maturityand the par value and market value of a bond? Explain.
Chapter 7P7–6Common stock value: Zero growthKelsey Drums, Inc., is a well-establishedsupplier of fine percussion instruments to orchestras all over the United States.The company’s class A common stock has paid a dividend of \$5.00 per share peryear for the last 15 years. Management expects to continue to pay at that amountfor the foreseeable future. Sally Talbot purchased 100 shares of Kelsey class Acommon 10 years ago at a time when the required rate of return for the stock was16%. She wants to sell her shares today. The current required rate of return for thestock is 12%. How much capital gain or loss will Sally have on her shares?
P7–8Common stock value: Constant growthUse the constant-growth model (Gordongrowth model) to find the value of each firm shown in the following table.FirmDividend expected next yearDividend growth rateRequired returnA\$1.208%B4.005C0.6510D6.008E2.25813%1514920
P7–9Common stock value: Constant growthMcCracken Roofing, Inc., common stockpaid a dividend of \$1.20 per share last year. The company expects earnings and dividendsto grow at a rate of 5% per year for the foreseeable future.a.What required rate of return for this stock would result in a price per share of \$28?b.If McCracken expects both earnings and dividends to grow at an annual rate of10%, what required rate of return would result in a price per share of \$28?g
P7–14

Course Hero member to access this document

Course Hero member to access this document

End of preview. Want to read all 9 pages?