1. The common stock of Auto Deliveries sells for $28.16 a share. The stock is expected to pay $1.35 per share next year when the annual dividend is distributed. The firm has established a pattern of increasing it's dividends by 3 percent annually and expects to continue doing so. What is the market rate of return on this stock?
2. KL Airlines paid an annual dividend of $1.42 a share last month. The company is planning on repaying $1.50, $1.75, and $1.80 a share over the next 3 years, respectively. After that, the dividend will be constant at $2 per share per year. What is the market price of this stock if the market rate of return is 10.5 percent?
3. Crystal Glass recently paid $3.60 as an annual dividend. Future dividends are projected at $3.80, $4.10, and $4.25 over the next 3 years, respectively. Beginning 4 years from now, the dividend is expected to increase by 3.25 percent annually. What is one share of this stock worth to you if you require a 12.5 percent rate of return on similar investments?
1. You are purchasing a 25-year, zero-coupon bond. The yield to maturity is 8.68 percent and the face value is $1,000. Please assume semi-annual compounding. What is the current market price?
2. The zero coupon bonds of D&L Movers have a market price of $319.24, a face value of $1,000, and a yield to maturity of 9.17 percent. Please assume semi-annual compounding. How many years is it until these bonds mature?
3. A 16-year, 4.5 percent coupon bond pays interest annually. The bond has a face value of $1,000. What is the percentage change in the price of this bond if the market yield to maturity rises to 5.7 percent from the current rate of 5.5 percent?
My brain is dead, I just can't seem to figure out how to approach these questions. Are there formulas? You don't have to solve them for me, I just need some help to get on the right track.
Thanks!
2. KL Airlines paid an annual dividend of $1.42 a share last month. The company is planning on repaying $1.50, $1.75, and $1.80 a share over the next 3 years, respectively. After that, the dividend will be constant at $2 per share per year. What is the market price of this stock if the market rate of return is 10.5 percent?
3. Crystal Glass recently paid $3.60 as an annual dividend. Future dividends are projected at $3.80, $4.10, and $4.25 over the next 3 years, respectively. Beginning 4 years from now, the dividend is expected to increase by 3.25 percent annually. What is one share of this stock worth to you if you require a 12.5 percent rate of return on similar investments?
1. You are purchasing a 25-year, zero-coupon bond. The yield to maturity is 8.68 percent and the face value is $1,000. Please assume semi-annual compounding. What is the current market price?
2. The zero coupon bonds of D&L Movers have a market price of $319.24, a face value of $1,000, and a yield to maturity of 9.17 percent. Please assume semi-annual compounding. How many years is it until these bonds mature?
3. A 16-year, 4.5 percent coupon bond pays interest annually. The bond has a face value of $1,000. What is the percentage change in the price of this bond if the market yield to maturity rises to 5.7 percent from the current rate of 5.5 percent?
My brain is dead, I just can't seem to figure out how to approach these questions. Are there formulas? You don't have to solve them for me, I just need some help to get on the right track.
Thanks!
