6. R&R Company is expected to pay a dividend of $4 next period, and dividends are expected to grow at 6% per year. If the required return is 16% and the current price (P0) is 40$, what is the stock price at year 4 (P4)? *

a) $45.1

b) $48.2

c) $50.5

d) $52.3

e) None of the above

7. ABC Fund has purchased a bond with 17 years remaining until maturity and a $1,000 face value. The bond is currently selling at a price of $1,050. The bond offers 11% coupon rate with interest paid annually. The bond may be called in 5 years at a call price of $1,070. What is the bonds yield to call (YTC)? *

a. 15.11%

b. 13%

c. 17.5%

d. 10%

e. None of the above

8. LSP Co.s stock price is $58.88, and it recently paid a $2.50 dividend. This dividend is expected to grow by 20% for the next 3 years, then grow forever at a constant rate, g; and rs = 12%. At what constant rate is the stock expected to grow after Year 3? *

a) 9.5%

b) 6.25%

c) 15.75%

d) 33.33%

e) None of the above

9. You are considering an investment in Tatas stock, which is expected to pay a dividend of $2.50 a share at the end of the year (D1 = $2.50) and has a beta of 0.9. The risk-free rate is 5.6%, and the market risk premium is 6%. Tata currently sells for $20.00 a share, and its dividend is expected to grow at some constant rate g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? *

a) $32.32

b) $78.00

c) $27.32

d) $0

e) None of the above

10. You have just invested in a bond that offers an annual coupon rate of 6%, with interest paid annually. The face value of the bond is $1,000 and the interest rate in the market is 5%. The bond matures in 10 years. What is the bonds price? *

a. $1,000

b. $1,077.21

c. $957

d. $1,050.28

e. None of the above