1. DLSUD Preferred 4%, issued 2 August 1992, has a par value of $25 per share. The required return on this security is estimated at 5.5 percent. Estimate the value of this stock.
2. A fund manager seeks to measure the sensitivity of her pension liabilities to market interest rate changes from a base rate of 7%. What is the funds effective duration?
3. Calculate the value of a 3-year 5% annual pay straight bond using binomial tree.
4. Use the information from the statement of cash flows to calculate FCFF for the three years 20102012. The tax rate is 30 percent.

Interest Rate Assumption 6% Present Value of Liabilities CAD 510.1 million CAD 455.4 million CAD 373.6 million 7% 8% 8.167% 4.646% 2.000% 6.050% 3.442% 4.482% Years Ending 31 December 2010 2011 2012 $97.52 45.00 (100.00) (6.00) 50.00 86.52 $107.28 49.50 (10.00) (6.60) 5.00 145.18 $118.00 54.45 (11.00) (7.26) 5.50 159.69 Cash flow from operations Net income Plus: Depreciation Increase in accounts receivable Increase in inventory Increase in accounts payable Cash flow from operations Cash flow from investing activities Purchases of PP&E Cash flow from financing activities Borrowing (repayment) Total cash flow Beginning cash Ending cash Notes: Cash paid for interest Cash paid for taxes 0.00 (50.00) (55.00) 22.40 108.92 27.10 131.80 24.64 119.82 108.92 $228.74 0.00 228.74 $108.92 $360.54 ($15.68) ($41.80) ($17.25) ($45.98) ($18.97) ($50.57)