1. International Cruise Lines sold a bond issue with 12-year maturity to build new ships. The bonds have a stated coupon rate of 4.5%. As an investor, you would like to earn a rate of return of 9.5%. How much should you be willing to pay for one of these bond?

2. Podunk Comm. bonds mature in 6 years and pay a coupon rate of 11%. Investors can currently invest in other bonds in the market and earn a return of 6%. If the bonds were issued 9 years ago, what is the value of one of these bonds today?

3. Ten years ago, WalMart Corporation issued bonds with a maturity of 30 years and a coupon rate of 6%. These bonds are now selling for $840. If you purchase these bonds at the market price, what YTM will you be earning?

4. You are thinking of buy a San Antonio municipal bond in order to avoid paying taxes. These bonds have a maturity remaining of 8 years and were originally issued with a coupon rate of 3.5%. Current bond quotes show a price of 105 for these municipal bonds. What will be your total return (YTM) if you purchase the bonds?

5. The S&P 500 is currently showing a market return of 13.5%. Treasury bonds are currently yielding 3% while municipal bonds are averaging 5% and corporate bonds are averaging 8%. ZLA stock has recently shown a historical return of 15%, a beta of 1.2, and a standard deviation of 9%. What is the required return for this stock?

6. MGM common stock is currently selling for $50 and recently paid out a dividend of $4. The S&P is currently returning 12% which results in a required return for MGM stock of 10%. Based on past revenue growth, dividends are expected to grow at a constant rate of 5% indefinitely. How much should you pay for this stock?

7. Amazon stock recently sold for $200 and is expected to pay out a dividend of $8 at the end of the year. Based on historical returns, this stock is estimated to have a beta of 1.4 and a historical return of 10%. If dividends are expected to grow at a constant rate of 2% and an investor requires a return of 12% based on risk, how much is this stock worth today? 8. A stock with a beta of 1.4 is currently selling for $45. Based on calculating the required return and growth rate for this stock, you have determined that you expect the stock to pay a dividend of $5 next year which results in a value today of $55. I should _________ (buy B/sell S) this stock since it is _________ (overvalued O/undervalued U) which means the _________ (see below a, b, c, d) a. Price is less than value b. Price is greater than value c. Stock is more risky than the market d. Stock is less risky than the market

9. Currently the S&P 500 is returning 11% while Treasury bonds are returning 5%. A stock recently paid a dividend of $3 and expects constant growth in its dividend of 8%. Based on this information, you have calculated a required return of 13%. You have also calculated a value of the stock of $60 and looked up the price of the stock and found it to currently be selling for $75. I should _________ (buy B/sell S) this stock since it is _________ (overvalued O/undervalued U) which means the _________ (see below a, b, c, d) a. Price is less than value b. Price is greater than value c. Required return is greater than the market return d. Required return is less than the market return

10.There is currently a bond available to purchase that has a 12% coupon rate and 20 years left to maturity. You require a return of 7% based on the riskiness of this bond. Use this information to complete your bond interpretation. (Note: You should be able to answer these without solving for price).

11. There is currently a bond that is selling for $940. It will mature in 10 years and was originally issued with a coupon rate of 4%. Use this information to complete your bond