# 18 excel a bond with a par value of 1000 has a coupon

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18.EXCELA bond with a par value of \$1,000 has a coupon rate of7 percent and matures in 15 years. Using a spreadsheet program,graph its price versus different yields to maturity, ranging from 1 per-cent to 20 percent. Is the relationship between price and yield linear?Why or why not?19.Global Cycles (GC) offers investors a dividend reinvestment plan(DRIP) program. An investor purchases 100 shares of GC at a priceof \$20 per share on January 2. How many shares will the investorown on December 31 if the following dividends are paid and theinvestor participates in the DRIP program (assume the firm allowsfractional shares and accounts for them up to three decimal places)?If the stock’s price is \$27.50 on December 31, what is the value ofher investment in GC?March 1: dividend paid of \$0.50 per share; stock price is \$21June 1: dividend paid of \$0.50 per share; stock price is \$22.5September 1: dividend paid of \$0.55 per share; stock price is \$19December 1: dividend paid of \$0.55 per share; stock price is \$2520.If a stock’s earnings per share are \$2.00, what will be the dividendper share if the payout ratio is 40 percent? If the following year’searnings per share are \$2.10, what will the payout ratio be if the firmwants to maintain dividend growth of 8 percent?21.You purchased 200 shares of H2O Corporation stock at a price of\$20. Consider each of the following announcements separately. Whatwill the price of the stock be after each change? How many shareswill you own? What will be the total value of your holdings (value ofstock plus any income)?a.The firm announces a 10 percent stock dividend.b.The firm announces a two-for-one stock split.c.The firm announces a \$0.50 per-share dividend (in your answeruse the price of the stock on the ex-dividend date).d.The firm announces it will repurchase 10 percent of its shares;you do not offer to sell any of your shares.22.The Fridge-Air Company’s preferred stock pays a dividend of\$4.50 per share annually. If the required rate of return on comparablequality preferred stocks is 14 percent, calculate the value of Fridge-Air’s preferred stock.23.The Joseph Company has a stock issue that pays a fixed dividendof \$3.00 per share annually. Investors believe the nominal risk-free rate is 4 percent and this stock should have a risk premium of6 percent. What should be the value of this stock?24.The Lo Company earned \$2.60 per share and paid a dividend of\$1.30 per share in the year just ended. Earnings and dividends pershare are expected to grow at a rate of 5 percent per year in the future.Determine the value of the stock:a.The required rate of return is 12 percent.b.The required rate of return is 15 percent.c.Given your answers to (a) and (b), how are stock prices affectedby changes in investor’s required rates of return?25.The French Thaler and Company’s stock has paid dividends of\$1.60 over the past 12 months. Its historical growth rate of dividendshas been 8 percent, but analysts expect the growth to slow to 5 percentannually for the foreseeable future.

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Term
Spring
Professor
NoProfessor
Tags
Capital accumulation, United States public debt, government spending