A major auto manufacturer has experienced a market re evaluation lately due to a number of lawsuits. The firm has a bond issue outstanding with 15 years to maturity and a coupon rate of 8% (paid semiannually). The required rate on the companys bond has now risen to 16%. Face value is $1,000. At what price can these securities be purchased on the market? (Bond value estimation)

$1,273.26

$1,000.02

$7,782.99

$ 549.71

$ 450.31

A firm has just paid an annual dividend of $3 per share (D0) of common stock. If the expected longrun growth rate for this firm is 10 percent, and if you require an annual rate of return of 16 percent, then how much should you be willing to pay for a share of this stock?

$61

$49

$58

$35

$55

A major auto manufacturer has experienced a market re evaluation lately due to a number of lawsuits. The firm has a bond issue outstanding with 15 years to maturity and a coupon rate of 8% (paid semiannually). The required rate on the companys bond has now risen to 16%. Face value is $1,000. At what price can these securities be purchased on the market? (Bond value estimation)

$1,273.26

$1,000.02

$7,782.99

$ 549.71

$ 450.31

7.15 points

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