1.Hope Corporation bonds bearing a coupon rate of 12%, pay coupons semiannually, have 3 years remaining to maturity, and are currently priced at $940 per bond. What is the yield to maturity? 

2. George, Inc. bonds have a face value of $1,000 and a 9% coupon paid semiannually; the bonds mature in 8 years. What current yield would be reported in The Wall Street Journal if the yield to maturity is 7%? 

3. On January 1, 2004, Pearce and Co. will issue new bonds to finance its expansion plans. Currently outstanding 9%, January 1, 2020 Pearce and Co. bonds are selling for $1,141. If interest is paid semiannually for both bonds, what must the coupon rate of the new bonds be in order for the issue to sell at par? 

4. Assume there is a 12-year, 9.5% semiannual coupon bond, with a par value of $1,000. The bond sells for $1,152. 

a. What is the bond’s yield to maturity (YTM)? 

b. What is the bond’s current yield? 

5. A zero-coupon bond with a par value of $1,000 has 15 years to maturity. If the YTM is 6.2%, what is the current price this bond? 

6. One year ago, Blazer, Inc. issued 17-year bonds at par. The bonds have a coupon rate of 6 percent and pay interest annually. Today, the market rate of interest on these bonds is 8.2 percent. How does the price of these bonds today compare to the issue price (what is the percentage difference and is it higher or lower)? 

7. Today is January 1, 2012 and you are considering purchasing an outstanding bond that was issued on January 1, 2010. It has a 9% annual coupon and originally had a 20-year maturity. The bonds can be called for 5 years from original issue date at a premium of $1085. Interest rates have declined and the bonds are currently selling for 112% of par. Calculate the YTM and the YTC. 

8. If the following bonds are identical except for coupon & price, what is the coupon of bond B? 

Bond A Bond B 

Face value $1,000 $1,000 

Semiannual Coupon $55 ? 

Years to maturity 20 20 

Price $1,100.00 $940 

9. Your company has a required rate of return 7%. The company has completed a new project that is expected to grow dividends at a rate of 50% the first year and 25% the 

paid was $1.00. What is the value per share of your firm’s stock? 

10. Boomer Products, Inc. manufactures “no-inhale” cigarettes. As their target customers age and pass on, sales of the product are expected to decline. Thus, demographics suggest that earnings and dividends will decline at a rate of 5% annually forever. The firm just paid a dividend of $4; given a required return is 10%, what is the current price of the stock? 

11. Bunky’s Eats recently paid $1.65 as an annual dividend. Future dividends are projected at $1.68, $1.72, $1.76, and $1.80 over the next four years, respectively. In year 5, the dividend is expected to increase by 2.5 percent annually. What is one share of this stock worth to you if you require an 11 percent rate of return on similar investments? 

12. Boo Daddy is a relatively new firm that appears to be on the road to great success. The company paid their first annual dividend today in the amount of $0.15 a share. The company plans to double each annual dividend payment for the next four years. After that time, they are planning on paying a constant dividend of $2.50 per share indefinitely. What is one share of this stock worth today if the market rate of return on similar securities is 10 percent? 

13. The Doggy Wash pays a constant annual dividend of $1.30 per share (growth rate (g)=0). How much are you willing to pay for one share if you require a 12 percent rate of return? 

14. Bug Buster just paid its annual dividend of $1.25 a share. The firm recently announced that all future dividends will be increased by 3 percent annually. What is one share of this stock worth to you if you require an 11 percent rate of return? 

15. Jackson Street Repair’s stock currently sells for $55 per share. The market requires a 12% return on the firm’s stock. If the company maintains a constant 5% growth rate in dividends, what was the most recent dividend per share paid on the stock? 

16. Longhorn, Inc. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 25 percent a year for the next three years and then decreasing the growth rate to 6 percent per year. The company just paid its annual dividend in the amount of $0.80 per share. What is the current value of one share of this stock if the required rate of return is 17 percent? 

17. Hope Company’s stock sells for $22 per share, its last dividend was $1.00, and its growth rate is a constant 8%. What is its required rate of return?