Exam 6: How to Value Bonds and Stocks

Queen and Bees,Inc.offers a 7% coupon bond with semiannual payments and a yield to maturity of 7.73%.The bonds mature in 9 years.What is the market price of a $1,000 face value bond?

Which of the following amounts is closest to the present value of a bond with coupon payment of $80 and a face value of $1,000? Interest payments are made at the end of each of 2 years,and the bond matures in 2 years.The spot interest rate for the first year is 10%,and the spot interest rate for the second year is 12%.

Consider a bond which pays 7% semi-annually and has 8 years to maturity.The market requires an interest rate of 8% on bonds of this risk.What is this bond's price?

Zeta Corporation has issued a $1,000 face value zero-coupon bond.Which of the following values is closest to the correct price for the bond if the appropriate discount rate is 4% and the bond matures in 8 years?

The market rate of interest on 2 year bonds is 6.25% while the rate on a one year bond maturing on one year is 5.50%.The forward rate on a one year bond one year from now is 6.5%.The liquidity premium to induce investors to hold the 2 year bond is:

A stock you are interested in paid a dividend of $1 last month.The anticipated growth rate in dividends and earnings is 25% for the next 2 years before settling down to a constant 5% growth rate.The discount rate is 12%.Calculate the expected price of the stock.

The Felix Corp.projects to pay a dividend of $.75 next year and then have it grow at 12% for the following 3 years before growing at 8% indefinitely thereafter.The equity has a required return of 10% in the market.The price of the stock should be ___.

The P/E ratio is a multiple of earnings that investors pay for a stock.The P/E is __________ related to growth,__________ related to the discount rate,and __________ related to the stock's risk.

If its yield to maturity is less than its coupon rate,a bond will sell at a ____,and increases in market interest rates will ____.

Which of the following statements is true?

Gugenheim,Inc.offers a 7% coupon bond with annual payments.The yield to maturity is 5.85% and the maturity date is 9 years.What is the market price of a $1,000 face value bond?

Suppose that a bond that will mature in three years is now traded at $99.83.The annual coupon payment is $5.635.Its yield to maturity is

A corporate bond with a face value of $1,000 matures in 4 years and has a 8% coupon paid at the end of each year.The current price of the bond is $932.What is the yield to maturity for this bond?

A consol is selling at $1,200 with an interest rate of 5%.How much would this bond sell for if the interest rate were 8% instead?

Term structure refers to:

The coupon of a bond is:

Suppose that an investor disagrees with market expectations and feels that the forward rate prevailing in the market is higher than what it should be,then the investor can make profit by:

Which of the following values is closest to the amount that should be paid for a stock that will pay a dividend of $10 one year from now and $11 two years from now? The stock will be sold in 2 years for an estimated price of $120.The appropriate discount rate is 9%.

Assume that you are using the dividend growth model to value stocks.If you expect the market rate of return to increase across the board on all equity securities,then you should also expect the:

Which of the following amounts is closest to what should be paid for Overland common stock? Overland has just paid a dividend of $2.25.These dividends are expected to grow at a rate of 5% in the foreseeable future.The required rate of return is 11%.