Bond Valuation Problem:

Taylor Company has a bond issue of $1000 par value bonds with a 8% annual coupon interest rate. The issue has ten years remaining to the maturity date. Bonds of similar risk are currently selling to yield 10% rate of return.

Will the Taylor Company bonds sell for a premium or a discount?

Calculate the current value (what an investor will pay today) of each Taylor Company bond.

Stock Valuation Problem:

The English Corporation has a beta of 1.30x, the risk-free rate of interest is currently 9% and the required return on the market portfolio is 12%. The Company plans to pay a dividend of $1.30 per share in the coming year and anticipates that future dividends will increase at an annual rate consistent with that experienced over the 2006 2009 period as shown below: