Reference no: EM132641896

1. Caswell Enterprises' bonds have a 10-year maturity, a 6.25% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 9.75%, based on semiannual compounding. What is the bond's price?

Select the correct answer.

a. $788.40

b. $779.58

c. $776.64

d. $785.46

e. $782.52

2. 5-year Treasury bonds yield 5.8%. The inflation premium (IP) is 1.9%, and the maturity risk premium (MRP) on 5-year bonds is 0.4%. What is the real risk-free rate, r*?

Select the correct answer.

a. 3.78%

b. 3.64%

c. 3.50%

d. 3.36%

e. 3.22%

3. A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 5%. What is the stock's current price?

Select the correct answer.

a. $15.23

b. $13.64

c. $14.17

d. $15.76

e. $14.70

4. $36.00 per share is the current price for Foster Farms' stock. The dividend is projected to increase at a constant rate of 5.50% per year. The required rate of return on the stock, rs, is 9.00%. What is the stock's expected price 3 years from today?

Select the correct answer.

a. $41.87

b. $42.27

c. $41.67

d. $42.07

e. $41.47

5. Orwell building supplies' last dividend was $1.75. Its dividend growth rate is expected to be constant at 12.00% for 2 years, after which dividends are expected to grow at a rate of 6% forever. Its required return (rs) is 12%. What is the best estimate of the current stock price?

Select the correct answer.

a. $34.42

b. $34.02

c. $34.82

d. $33.62

e. $35.22