I must have the formulas and where the numbers go in the formula and the answers for all questions. A2. (Bond valuation) Find the missing information for each of the following bonds. The coupons are paid in semiannual installments, so the number of payments is equal to twice the bonds life in years. The YTM is compounded semiannually. BOND N. (Years) Yield to Maturity Present Value Coupon Rate Face Value 1 8 10.2% __________ 8.0 % $1,000 2 7 8.0% __________ 9.0% $1,000 3 15 9.5% __________ 7.5% $1,000 4 20 __________ $1,075.00 8.5% $1,000 Need Formula Need Problem put in formula Need answer for the blanks A8. (One-period dividend discount model) Mead is expected to pay a $1.40 dividend in the next year and to sell for $68.00 in one year. Discounted at a required return of 12%, what is the value of one share of Mead today? Need Forumla Need Problem put in formula Need answer A10(Dividend discount model) Assume RHM is expected to pay a total cash dividend of $5.60 next year and its dividends are expected to grow at a rate of 6% per year forever. Assuming annual dividend payments, what is the current market value of a share of RHM stock if the required return on RHM common stock is 10%? A12(Required return for a preferred stock) James River $3.38 preferred is selling for $45.25. The preferred dividend is non-growing. What is the required return on James River preferred stock? A13. (Required return for a preferred stock) Sony $4.50 preferred is selling for $65.50. The preferred dividend is non-growing. What is the required return on Sony preferred stock? Need Forumla Need Problem put in formula Need answer . A14(Stock valuation) Suppose Toyota has non-maturing (perpetual) preferred stock outstanding that pays a $1.00 quarterly dividend and has a required return of 12% APR (3% per quarter). What is the stock worth? A15. (Stock valuation) Lets say the Mill Due Corporation is expected to pay a dividend of $5.00 per year on its common stock forever into the future. It has no growth prospects whatsoever. If the required return on Mill Dues common stock is 14%, what is a share worth? Need Forumla Need Problem put in formula Need answer B15. (Interest-rate risk) A quick look at bond quotes will tell you that GMAC has many different issues of bonds outstanding. Suppose that four of them have identical coupon rates of 7.25% but mature on four different dates. One matures in 2 years, one in 5 years, one in 10 years, and the last in 20 years. Assume that they all made coupon payments yesterday. a. If the yield curve were flat and all four bonds had the same yield to maturity of 9%,what would be the fair price of each bond today? b. Suppose that during the first hour of operation of the capital markets today, the term structure shifts and the yield to maturity of all these bonds changes to 10%. What is the fair price of each bond now? c. Suppose that in the second hour of trading, the yield to maturity of all these bonds changes once more to 8%. Now what is the fair price of each bond? d. Based on the price changes in response to the changes in yield to maturity, how is interest-rate risk a function of the bonds maturity? That is, is interest-rate risk the same for all four bonds, or does it depend on the bonds maturity? Need Formula Need Problem put in formula Need answer B19. (Constant growth model) a. The current dividend for Birmingham Electric is $2.40 and is growing at 5% annually. If the required return is 13%, what is the value of one share of stock? b. Montgomery Audio is expected to pay a $1.30 dividend next year. The dividend is expected to grow at 6% Need Formula Need Problem put in formula Need answer B17. (Default risk) You buy a very risky bond that promises an 8.8% coupon and return of the $1,000 principal in 10 years. You pay only $500 for the bond. a. You receive the coupon payments for two years and the bond defaults. After liquidating the firm, the bondholders receive a distribution of $150 per bond at the end of 2.5 years. What is the realized return on your investment? b. The firm does far better than expected and bondholders receive all of the promised interest and principal payments. What is the realized return on your investment? Need Forumla Need Problem put in formula Need answer B19. (Constant growth model) a. The current dividend for Birmingham Electric is $2.40 and is growing at 5% annually. If the required return is 13%, what is the value of one share of stock? b. Montgomery Audio is expected to pay a $1.30 dividend next year. The dividend is expected to grow at 6% annually. If the current stock price is $21.25, what is Montgomerys required return? Need Formula Need Problem put in formula Need answer Chapter 7 A6. (Required return) According to the CAPM, what would be the required return on an asset that has a beta of 1.25 when the expected return on the market portfolio is 12% and the riskless return is 5%? Need Formula Need Problem put in formula Need answer A8. (Market price of risk) The market portfolio has an expected return of 14% and a standard deviation of 15%. The riskless return is 5%. a. What is the market price of risk (rM -rf )? b. What is the slope of the capital market line (which is the price of market risk divided by the standard deviation of the market return)? Need Formula Need Problem put in formula Need answer B12. (CAPM) Owego Storage and Housing, Inc., is considering building a new warehouse in Endicott, New York. Owego Storage has 2 million common shares outstanding. The share price is $11. Assume rf 4.5%, 0.75, and (rM -rf )? 11.5%. Estimate Owego Storages required return on its equity investment in the new warehouse. Need Forumla Need Problem put in formula Need answer B10. (CAPM) Stock A has a beta of 1.4 and a required return of 18.5%. The market return is 15%. What will be the required return on stock B, which has a beta of 1.9? Need Formula Need Problem put in formula Need