1. Using excel find the answers to the following: (remember to use excel functions)

a. Find the price today of a five year bond with a $1000 face value with a 10 percent coupon. Assume that investors require an 8 percent YTM. Assume also that payments are made semi-annually.

b. Suppose the bond in problem 1 sells for $1200 today. Solve for its YTM.

c. Find the price of a share of common stock that is expected to pay a dividend of $2 next year. Dividends are expected to grow at 4 percent through year 3, then at 3 percent for 2 years, and then 2 percent forever. Assume that stockholders require a 10 percent return.