What is the required return

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1. Interpreting Bond Yields.  Suppose you buy a 7 percent coupon, 20-year bond today when it's first issued.  If interest rates suddenly rise to 15 percent, what happens to the value of your bond?    Why?

2. Bond Yields.  The Timberlake-Jackson Wardrobe Co. has 10 percent coupon bonds on the market with nine years left to maturity.  The bonds make annual payments.  If the bond currently sells for $1,145.70, what is its YTM?

3. Coupon Rates.  Osborne Corporation has bonds on the market with 10.5 years to maturity, an YTM of 9.4 percent, and a current price of $945. The bonds make semiannual payments. What must the coupon rate be on the bonds?

4. Stock Values.  The next dividend payment by Mosby, Inc. will be $2.45 per share. The dividends are anticipated to maintain a 5.5 percent growth rate, forever. If the stock currently sells for $48.50 per share, what is the required return?

5. Stock Values.  Ziggs Corporation will pay a $3.85 per share dividend next year. The company pledges to increase its dividend by 4.75 percent per year, indefinitely. If you require a 12 percent return on your investment, how much will you pay for the company's stock today?

6. Growth Rates.  The stock price of Jenkins Co. is $53.  Investors require a 12 percent rate of return on similar stocks.  If the company plans to pay a dividend of $3.15 next year, what growth rate is expected for the company's stock price?

Reference no: EM13196707

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