Question
1. Which of the following must be correct with the discount bond? Its coupon rate is higher than the YTM on similar bonds None of
1. Which of the following must be correct with the discount bond?
Its coupon rate is higher than the YTM on similar bonds
None of above
its yield to maturity is lower than its coupon rate
its current yield is lower than its coupon rate
2. ABC common stock is expected to have extraordinary growth in earnings and dividends of 20% per year for 3 years, after which the growth rate will settle into a constant 5%. If the discount rate is 12% and the most recent dividend was $3, what should be the approximate current share price?
63.2
none of above
43.3
52.9
3. An investment property generates a perpetual cash flow of $10,000 a year starting at the end of the first year. If your opportunity cost of capital is 8%, what it is value of the investment property today?
$200,000
$10,000
$125,000
none of above
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