Reference no: EM133205009

FINANCIAL MANAGEMENT: BONDS AND STOCKS

Solve each problem and show solution.

1. A company plans on taking out real estate loan of $10 Million on its distribution center. The company will make even payments at the end of each year over ten years. At the end of ten years, the company will have paid back the loan and they will have made ten payments. The interest rate equals 4.5%. What is the annual payment amount?

2. A $1,000 unit bond has a coupon rate of 4% (interest paid yearly at $40 per year).  The bond has five years left until it matures.  The current market interest rate equals 5%.

Compute the bond's market value today?

3. Calculate the value of a 25-year bond, with par value of 1000$ with a 6.5% semi-annual coupon and selling at a yield of 5.13%

4. A stock pays a $2 dividend in year zero. Investors think the dividends will grow at 3% rate per year. This investor wishes to earn 15% on any stock investments (required return). Compute the common stock's current market value.  

5.   The next dividend payment by Kilbride Inc. will be $1.89 per share. The dividends are anticipated to maintain a 5% growth rate forever. If the stock currently sells for $38.00 per share, what is the required return?