1

Watters Umbrella Corp. issued 15-year bonds three years ago at a coupon rate of 6.5 percent. The bonds make semiannual payments.

If these bonds currently sell for 106 percent of par value, what is the YTM? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)

YTM %

2

Suppose the following bond quote for IOU Corporation appears in the financial pages of todays newspaper. Assume the bond has a face value of $1,000, paying semiannual coupon, and the current date is April 15, 2016. (Do not round intermediate calculations. Round the final answers to 2 decimal places.)

Company (Ticker)

Coupon

Maturity

Last Price

Last Yield

Estimated volume (in $ thousands)

IOU (IOU)

8.20

Apr 15, 2025

104.86

??

1,847

What is the YTM of the bond?

YTM %

What is the current yield?

Current yield %

3

Bond P is a premium bond with a 10 percent coupon. Bond D is a 5 percent coupon bond currently selling at a discount. Both bonds make annual payments, have a YTM of 7 percent, and have 5 years to maturity.

What is the current yield for bond P and bond D? (Do not round intermediate calculations. Round the final answers to 2 decimal places.)

	Current Yield
Bond P	%
Bond D	%

If interest rates remain unchanged, what is the expected capital gains yield over the next year for bond P and bond D? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round the final answers to 2 decimal places.)

	Capital Gains Yield
Bond P	%
Bond D	%

4

The newspaper reported last week that Bennington Enterprises earned $26.5 million this year. The report also stated that the firms ROE is 15 percent. Bennington retains 85 percent of its earnings.

a. What is the firm's earnings growth rate? (Round the answer to 2 decimal places.)

Earnings growth rate %

b. What will next year's earnings be? (Enter the answer in dollars, not millions of dollars. Omit $ sign in your response.)

Next year's earnings $