Answer the following questions

1 M4 Problem Set 2: Numerical Questions Online Answer the following questions: 1. What should the current market price be for a bond with a $1,000 face value, a 10% coupon rate paid annually, a required rate of return of 12%, and 20 years until maturity? 2. What should the current market price be for a bond with a $1.000 face value, a 10% coupon rate paid annually, a required rate of return of 8%, and 20 years until maturity? 3. What generalizations about bond prices can you make given your answers to #1 and #2? 4. 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? 5. 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? 6. What generalizations about bond prices can you make given your answers to #4 and #5? 7. 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 Brady's stock is 10%, what should the current price of the stock be? 8. Page 253: ST1 9. Page 253: ST2 .O. Page 254: #2b, c Submission Instructions: 7-8 Self-Test Problems ST1. What is the current value of a share of Commonwealth Edison common stock to an investor who requires a 12 percent annual rate of return, if next year's divi- dend, D. is expected to be $3 per share and dividends are expected to grow at an annual rate of 4 percent for the foreseeable future? ST2. The Edgar Corporation currently (D.) pays a $2 per share dividend. This divi- dend is expected to grow at a 20 percent annual rate over the next three years and then to grow at 6 percent per year for the foreseeable future. What would you pay for a share of this stock if you demand a 20 percent rate of return? ST3. Capitol Industries has 7 million shares of stock outstanding. In an election for the board of directors, 80 percent of the shares are voted. The company has seven directors on its board, all of whom are elected annually. a. If the company uses a majority rule voting procedure, how many shares are required to elect i. One director ii. Two directors iii. A majority of the members of the board b. If the company uses a cumulative voting procedure, how many shares are required to elect i. One director ii. Two directors iii. A majority of the members of the board ST4. Referring to the following listing for Disney on November 27, 2015: 22.23 122.08 90 Disney DIS 1.1 23 115.13 -3.54 determine the a. Closing price on November 27, 2015 b. Price change from the previous trading day 7-9 Problems INT 17 1. General Cereal common stock dividends have been growing at an annual tale 7 percent per year over the past 10 years. Current dividends are $1.70 per Shoe a. Dividends are expected to continue growing at the historic rate for the totes b. The dividend growth rate is expected to increase to 9 percent per year. c. The dividend growth rate is expected to decrease to 6.5 percent per year. 2. The Foreman Company's earnings and common stock dividends have been at an annual rate of 6 percent over the past 10 years and are expected to con growing at this rate for the foreseeable future. The firm currently (that is, as you 0) pays an annual dividend of $5 per share. Determine the current value of a of Foreman common stock to investors with each of the following required ratesi BASIC future. requires a Spreadsheet Strategies What is value of share of this stock to an investor 12 percent rate of return if the following conditions exist? ws TERMEDIATE Spreadsheet Strategies BASIC return: a. 12 percent b. 14 percent c. 16 percent d. 6 percent e. 4 percent 3. The common stock of General Land Development Company (GLDC) is expected to pay a dividend of $1.25 next year and currently sells for $25. Assume that the fim future dividend payments are expected to grow at a constant rate for the foreseka future. Determine the implied growth rate of GLDC's dividends (and earnings), assuming that the required rate of return of investors is 12 percent. Cascade Mining Company expects its earnings and dividends to increase by ? ca DIATE netant thereatio