Which has greater price risk or interest rate risk

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1. We have two bonds both have coupon rates of 8%, both have a face value of $1,000. The Chevrolet bond has 10 years until maturity. The Ford bond has 2 years until maturity. Which has greater price risk or interest rate risk?

2. You are considering investing in a $1000 face value 8% semi-annual coupon bond with 3 years left to maturity. Similar bonds are yielding 9.5% in the market, so the current price of this bond is _______, and if market interest rates drop to 8.25% the selling price of the bond would _____________?

3. The DCF Corporation just paid a dividend of $1.18 per share. The company's CFO expects that the dividend will remain at that level for four years. After year four, it is expected that the dividend will grow at a rate of 3% indefinitely. If the required return is 11%, what is the value of a share of stock?

Reference no: EM131990424

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