1)A $100 bond payable in a year sells for $97.56. What is the yield to maturity?

2)Sam promises to pay Joe $1,904 in a year if Joe gives him $1,498 today. What interest rate is Sam paying and what interest rate Joe is earning?

_____________________________________________________________

Use the one-period valuation model P = E/(1 + k) + P1/(1 + k) to price the following stocks (remember to decimalize percentages).

Dividends (E = $)	Required return (k = %)	Expected price next year (P1 = $)	Answer: price today (P = $)
1.00	10	20	19.10
1.00	15	20	18.26
1.00	20	20	17.50
0	5	20	19.05
0	5	30	28.57
0	5	40	38.10
1.00	10	50	46.36
1.50	10	50	46.82
2.00	10	50	47.27
0	10	1	0.91

Use the Gordon growth model P = E (1 + g)/(k g) to value the following stocks (remember to decimalize percentages).

Earnings (E = $)	Required return (k = %)	Expected earnings growth rate (g = %)	Answer: price today (P = $)
1	10	5	20.00
1	15	5	10.00
1	20	5	6.67
1	10	5	20.00
2	10	5	40.00
3	10	5	60.00
1	30	5	4.00
1	30	10	10.00
1	30	15	20.00
100	20	10	1,000.00