Q1. Medium Size Retailer Corporation's (MSRC) 5-year bonds yield 8.75%, and 5-year T-bonds yield 4.50%.The real risk-free rate is r* = 2.45%, the inflation premium for 5-year bonds is IP = 1.65%, the default risk premium for MSRC's bonds is DRP = 2.65% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t - 1) x 0.1%, where t = number of years to maturity.What is the liquidity premium (LP) on MSRC's bonds?Enter your answer rounded to two decimal places.Do not enter % in the answer box.For example, if your answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.

Q2.A 10-year, $1,000 par value bond has a 6.75% coupon rate with interest paid semiannually.The bond currently sells for $825.What is the capital gains yield on these bonds?Enter your answer rounded to two decimal places.Do not enter % in the answer box.For example, if your answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.

Q3.O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 20 years.Their nominal yield to maturity is 8.75%, they pay interest semiannually, and they sell at a price of $800.What is the bond's nominal (annual) coupon interest rate?Enter your answer rounded to two decimal places.Do not enter % in the answer box.For example, if your answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.

Q4.A share of common stock has just paid a dividend of $2.50.If the expected long-run growth rate for this stock is 3%, and if investors' required rate of return is 11.5%, what is the stock's intrinsic value?Enter your answer rounded to two decimal places.Do not enter $ or comma in the answer box.For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.

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