1. A 7-month maturity bond is traded in a secondary market. The face value is $100 and the coupon rate is 10%. The coupons are paid semiannually and its YTM is 8%. Find the bond price.

2. a) The stock price of Lemons Inc. is $85 per share with earnings of $8 per share. Find the present value of its growth opportunities (PVGO) if the market required rate of return is 10%?

2. b) We know the PV formula for constant dividend growth case is as follows. P0 = D1/k - g where g = r*b; derive P/E from the above formula.