part 5.7

5. R&R Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $9.50 per share. If the required return on this preferred stock is 6.5%, at what price should the stock sell? * a) $104.27 Ob) $106.95 O c) $109.69 O d) $146.15 O e) None of the above 6. R&R Company is expected to pay a dividend of $4 next period, and dividends are expected to grow at 6% per year. If the required return is 16% and the current price (PO) is 40$. what is the stock price at year 4 (P4)? O a) $45.1 Ob) S48.2 O c) $50.5 d) $52.3 e) None of the above 7. ABC Fund has purchased a bond with 17 years remaining until maturity and a $1,000 face value. The bond is currently selling at a price of $1,050. The bond offers 11% coupon rate with interest paid annually. The bond may be called in 5 years at a call price of $1,070. What is the bond's yield to call (YTC)? * O a. 15.11% O b. 13% O c. 17.5% O d. 10% O e. None of the above 8. LSP Co.'s stock price is $58.88, and it recently paid a $2.50 dividend. This dividend is expected to grow by 20% for the next 3 years, then grow forever at a constant rate, g: and rs = 12%. At what constant rate is the stock expected to grow after Year 3? * O a) 9.5% O b) 6.25% O c) 15.75% d) 33.33% e) None of the above 9. You are considering an investment in Tata's stock, which is expected to pay a dividend of $2.50 a share at the end of the year (D1 = $2.50) and has a beta of 0.9. The risk-free rate is 5.6%, and the market risk premium is 6%. Tata currently sells for $20.00 a share, and its dividend is expected to grow at some constant rate g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? O a) $32.32 O b) $78.00 c) $27.32 O d) $0 e) None of the above