QuestionQuestion

1.) Consider the following information .How many shares do you hold today if you bought 1,000 shares of this stock at the beginning of 1985?

1986-10 percent stock dividend
1987-10 percent stock dividend
1988-25 percent stock dividend
1989-100 percent stock dividend
1994-2 for 1 stock split
1994-2 for 1 stock split
2007-100 percent stock dividend

2.) Ten years ago a stock paid a $0.30 dividend. Since then it has split 2 for 1 twice. The current dividend is $ 0.16.If you have a required rate of return of 14 percent ,what is the most you can pay for this stock?

3.) Ten years ago a stock paid $ 0.40 dividend. Since then it has a split 3 for 1.The current dividend is $ 0.18.If you have a required rate of return of 15 percent, what is the most you can pay for the stock?

4.) A stock split sells for $ 40.23 and currently pays a $ 0.55 dividend. If the market expects a 13 percent rate of return of this stock, what dividend growth rate do these figures imply.?

Assume that all bonds are $ 1,000 par value.

5.) A person buys a five year ,$1,000 certificate of deposit that carries a nominal rate of 9 percent, compounded semiannually. Six months after this purchase a 4 ½ year CD at the same bank offers a 9.5 percent annual rate, also compounded semiannually. How much difference is there in total interest paid by the two competing investments?

6.) A seven-year bond with an 8 percent coupon rate has a yield to maturity of 9.15 percent. What is the current bond price?

7.) Calculate the duration of the bond in Problem 2 using the following methods.
a.)The traditional method
b.)The closed form method

8.) A zero coupon bond matures in eight years and sells for $500.
a.)Without doing any calculations, estimate its yield to maturity
b.)Calculate the exact yield to maturity.

Solution PreviewSolution Preview

This material may consist of step-by-step explanations on how to solve a problem or examples of proper writing, including the use of citations, references, bibliographies, and formatting. This material is made available for the sole purpose of studying and learning - misuse is strictly forbidden.

1.) Consider the following information .How many shares do you hold today if you bought 1,000 shares of this stock at the beginning of 1985?

1986-10 percent stock dividend (X 1.1)
1987-10 percent stock dividend (X 1.1)
1988-25 percent stock dividend (X 1.25)
1989-100 percent stock dividend (X 2)
1994-2 for 1 stock split (X 2)
1994-2 for 1 stock split (X 2)
2007-100 percent stock dividend (X 2)

1000 x 1.1 x 1.1 x 1.25 x 2 x 2 x 2 x 2 = 24,200

2.) Ten years ago a stock paid a $0.30 dividend. Since then it has split 2 for 1 twice. The current dividend is $ 0.16.If you have a required rate of return of 14 percent, what is the most you can pay for this stock?

Calculate g:

First you owned 1 share and now you have 4. Current dividends on an adjusted basis are therefore $0.16 x 4 = $0.64, and they “grew” 7.87%:

.30(1 + g)10 = .64  g = (.64/.30).1 – 1 = 7.87%
Pt = Div(t+1)/(r-g) = .16(1.0787)/(.14 - .0787) = $2.82...
$34.00 for this solution

PayPal, G Pay, ApplePay, Amazon Pay, and all major credit cards accepted.

Find A Tutor

View available Finance Tutors

Get College Homework Help.

Are you sure you don't want to upload any files?

Fast tutor response requires as much info as possible.

Decision:
Upload a file
Continue without uploading

SUBMIT YOUR HOMEWORK
We couldn't find that subject.
Please select the best match from the list below.

We'll send you an email right away. If it's not in your inbox, check your spam folder.

  • 1
  • 2
  • 3
Live Chats