2.

a) A annual bond has a face value of $1,000 and maturity of 12 years. Assume that its coupon rate is 6.06% and yield to maturity is 8.05%. What is this bonds market price?

b) How much should an investor pay for a stock that has a stable annual dividend of $6.2? They want to earn a rate of return of 11.58%.

c) Lets say Omega Records dividend payment will be $1.03 one year from now, $2.75 two years from now, and $3.48 three years from now. Further assume that after this the dividend will grow by 5.38% each year. The required rate of return for the industry is 10.33%. What is the value of Omega Records stock?

d) What is the YTM for a zero-coupon bond with a current price of $870.32 a par value of $1,000 and a remaining term of 3 years? (Round to the nearest thousandths)

e What is the payback period (in annual terms) of the following cashflow stream?)

f) What is the IRR for the following cash flow stream? (Blackboard will yell at you about the units (%), when tested it looks like adding the units or leaving the units off of this problem makes no difference in the grading. Do NOT answer in decimal form!) Year 0: $-4829 --- Year 1: $2372 --- Year 5: $2850 --- Year 10: $2500