Reference no: EM132420510

Question 1

You are called in as a financial analyst to appraise the bonds of the XYZ Corporation. The $1,000 par value bonds have a quoted annual interest rate of 16 percent, which is paid semiannually. The yield to maturity on the bonds is 13 percent annually. There are 25 years to maturity. Include all calculations.

Required:

a) Compute the price of the bonds.

b) With 15 years remaining to maturity, if yield to maturity goes down substantially to 10 percent, what will be the new price of the bonds?

c) With a price of $900 what is the yield to maturity if bond has 10 year to maturity?

Question 2

You are called in as a financial analyst to appraise the bonds from 3 Corporations:

1) A Corporation. The $1,000 par value bonds have a quoted annual interest rate of 16 percent, which is paid semiannually. The yield to maturity on the bonds is 13 percent annually. There are 25 years to maturity. Include all calculations.

2) B Corporation. The $1,000 par value bonds have a quoted annual interest rate of 15 percent, which is paid semiannually. The yield to maturity on the bonds is 10 percent annually. There are 25 years to maturity. Include all calculations.

3) C Corporation. The $1,000 par value bonds have a quoted annual interest rate of 16 percent, which is paid semiannually. The yield to maturity on the bonds is 10 percent annually. There are 20 years to maturity. Include all calculations.

Required:

a) Compute the price of all three bonds.

b) Prepare bar chart showing price of all three bonds as per example below

Question 3

A preferred share of Winter Company pays an annual dividend of $12. It has a required rate of return of 9 percent. Compute the price of a preferred share. Include all calculations.

Question 4

Kitchener Company will pay a dividend of $1.25 per share in the next 12 months (D₁). The required rate of return (K_e) is 8 percent and the constant growth rate is 4 percent.

a) Compute P₀.

a. (For the remaining questions in this problem, all variables remain the same except the one specifically changed. Each question is independent of the others.)

b) Assume K_e, the required rate of return, goes up to 12 percent, what will be the new value of P₀?

c) Assume the growth rate (g) goes up to 6  percent, what will be the new value of P₀?

d) Assume D₁ is $2.00, what will be the new value of P₀?

Question 5

Your bank will lend you $10,000 for 60 days at a cost of $50 interest.

 a. What is your annual rate of interest? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.)

Question 6

You are going to borrow $30,000 for one year at 10 percent interest.

1.  What is the annual rate of interest if the loan is discounted? (Use 365 days in a year. Round the final answer to 2 decimal places.)