Module 4 Compiled
2016-09-10, 6:39 PM
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The stock of company XYZ is currently price at $80 per share. Its earnings this year
(T=0) are $4.00 per share. It has paid out a dividend equal to 40% of its earnings for the
past several years. Its Return on Equity (ROE) has been 15%.
W_h_a_t_ _i_s_ _t_

The stock of company XYZ is currently price at $80 per share. Its earnings this year (T=0)
are $4.00 per share. It has paid out a dividend equal to 40% of its earnings for the past several
years. Its Return on Equity (ROE) has been 15%.
1. What is the com

The stock of company XYZ is currently price at $80 per share. Its earnings this year
(T=0) are $4.00 per share. It has paid out a dividend equal to 40% of its earnings for the
past several years. Its Return on Equity (ROE) has been 15%.
What is the estima

Market Multiples
8. If the forward Price / Earnings ratio for XYZ during similar stages of the business cycle
had ranged from 11x to 18x, what would be the range of values for its stock?
E1 = E0 x (1+g) = 4 x 1.09 = 4.36
11x4.36 = 47.96 18 x 4.36 = 78.48

The stock of company XYZ is currently price at $80 per share. Its earnings this year
(T=0) are $4.00 per share. It has paid out a dividend equal to 40% of its earnings for the
past several years. Its Return on Equity (ROE) has been 15%.
3. What dividends

The stock of company XYZ is currently price at $80 per share. Its earnings this year
(T=0) are $4.00 per share. It has paid out a dividend equal to 40% of its earnings for the
past several years. Its Return on Equity (ROE) has been 15%.
What is the estima

Bob & Kate are purchasing a new home. The house theyve selected has a price of $350,000.
The mortgage interest rate is currently 5% (regardless of the option they pick below).
They are considering several options:
_For maturity, they are considering both

Financial Markets & Institutions
Interest Rate Exercise
Homework Exercise 1 - Solutions
What are the current interest rates for the following?
Instrument
Rate
Source of
Information
Short Term Rates / Money Market
30 Day / 1 month T-Bills
90 Day / 3 month

Financial Markets & Institutions
Bond Pricing Exercise
Homework Exercise 2
1) Calculate the Value of the Bonds under the following assumptions:
Assume that the principal amount for all bonds is $1000 and that interest is paid
annually.
Period 1
Period 2
I

Module 2 Compiled
2016-09-10, 6:41 PM
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Module 1 Compiled
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Module 3 Compiled
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3. Assume that Bob & Kate purchase the house putting 20% down and selecting the 15 year
amortization period. Construct a Mortgage Amortization Table reflecting the first 3 months of
payments
Month
Beginning
Payment
Interest on
Principal
Principal
Principa