1. Macys is planning a store expansion by issuing 10-year zero coupon bond that makes semi-annual coupon payments at a rate of 5.875% with a face value of $1,000. Assuming semi-annual compounding, what will be the price of these bonds, if the appropriate discount rate is 14%?

2. Carrie wants to invest in five year bonds that are currently priced at $872.48. These bonds have a coupon rate of 6% and make semiannual coupon payments. What is the current market yield of this bond? a. What is the current market yield of this bond? b. Is the bond trading at a premium or discount? Explain.

3. ConEdison Utility Company has four-year bonds outstanding that pay a coupon rate of 6.6% and make coupon payments semiannually. If these bonds are selling at $918.39, what is the yield to maturity that an investor can expect to earn on these bonds?

4. Referring to question #3, what is the effective annual yield?

5. Sprint has issued bonds that will mature in six years and pay an 8% coupon semiannually. If you paid $1,051.98 today and your required return was 6.6%, did you overpay? underpay? Or pay the fair price? Explain.

6. In 2014, AT&T issued 10-year bonds with a coupon that pays $93.75 annually. At the time of issue, the bonds sold at par. Today, bonds of similar risk and maturity must pay an annual coupon of 7.25% to sell at par value. Assuming semi-annual payments (and compounding effects), what is the bonds yield to maturity?

7. Referring to #6, what is the current price of the firms bonds?

8. You are currently thinking about investing in a stock valued at $25.00 per share. The stock recently paid a dividend of $2.25 and its dividend is expected to grow at a rate of 5% for the foreseeable future. You normally require a return of 14% on stocks of similar risk. Is the stock overpriced, underpriced, or fairly priced?

9. Based on your answer, in #8, would you invest? Why or why not?

10. Triton Inc. is expected to grow at a rate of 22% for the next five years and then settle to a constant-growth rate of 6%. The company recently paid a dividend of $2.35. The required rate of return is 15%. What is the value of the stock at the end of year 5?