1. A bond has a market price of $1,000, a $1,000 face value, a 10% coupon rate paid annually, a required rate of return of 10%, and 30 years until maturity. If the required rate of return immediately increased to 13%, what is the new market price of the bond?
2. A bond has a market price of $1,000, a $1,000 face value, a 10% coupon rate paid annually, a required rate of return of 10%, and 10 years until maturity. If the required rate of return immediately increased to 13%, what is the new market price of the bond?
3. What generalizations about bond prices can you make given your answers to #4 and #5?
4. The CFO of Brady Corp. announces that the firm plans to grow its annual dividend at a rate of 3% forever. The company just paid its annual dividend (Do) of $2.00 per share. If the required rate of return on Bradys stock is 10%, what should the current price of the stock be?