Goldman Sachs common stock has just paid a dividend of $ 1.87. If the expected constant growth rate for this stock is 15 percent, and if investors require a 16.5 percent rate of return (r_s), what is the price of the stock?

1. $11.33
2. $12.47
3. $124.67
4. $143.33
5. $157.50

5. Bonds issued by Rondo Communications that have a coupon rate of interest equal to 10.65

percent currently have a yield to maturity (YTM) equal to 15.25 percent. Based on this information, Rondo's bonds must currently be selling at __________ in the financial markets.

a. par value

b. a discount

c. a premium

d. None of the above is a correct answer.

6. If a stock pays a dividend of $6 in the first year (D₁), the current price is $125, and the

growth rate is 8%, what is the required rate of return (r_s)?

a. 8.6%

b. 12.8%

c. 15.7%

d. 20.0%

7. What is the approximate yield to maturity for a $1000 par value bond

selling for $1085 that matures in 9 years and pays 9.5 percent coupon interest annually?

1. 9.85 percent
2. 9.21 percent
3. 9.00 percent
4. 8.78 percent
5. 8.13 percent

A $1,000 par, 6% coupon rate bond with a remaining life of 8 years pays interest semiannually. What is this bonds approximate current market value if the going rate of interest for similar bonds is 7% (i.e. rd=7%)?

a. $ 879.32

b. $ 939.53

c. $1,032.04

d. $1,062.81

e. $1,289.82