1.

A company has 8-year bonds outstanding that pay an 8.4 percent coupon rate. Investors buying the bond today can expect to earn a yield to maturity of 14.8 percent p.a.. What should the company's bonds be priced at today? Assume annual coupon payments and a face value of $1000. (Rounded to the nearest dollar)

a.

$3017

b.

$521

c.

$711

d.

$1362

2.

A companys dividend grows at a constant rate of 3 percent p.a.. Last week it paid a dividend of $4.65. If the required rate of return is 15 percent p.a., what is the price of the share 3 years from now? (round to nearest cent)

a.

$42.34

b.

$60.70

c.

$43.61

d.

$28.68

3.

A fast growth share has the first dividend (t=1) of $1.53. Dividends are then expected to grow at a rate of 8 percent p.a. for a further 2 years. It then will settle to a constant-growth rate of 1.6 percent. . If the required rate of return is 15 percent, what is the current price of the share? (to the nearest cent)

a.

$24.15

b.

$16.53

c.

$11.42

d.

$12.65

4.

What is the value (to the nearest cent) of a 8 year 6.8% coupon bond with a face value of $1,000. The yield-to-maturity on the bond is 4.4% and the bond makes semi-annual coupon payments.

a.

$708.59

b.

$1662.16

c.

$1160.38

d.

$1158.95