Question 10

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You expect to receive the following cash flows. How much are these cash flows worth today?

The current interest rate is 5% compounded annually

After one year: $80.00

After two years: $80.00

After three years: $180.00

(If doing this problem on a calculator, please take intermediary calculations out to four decimal places. Answer in dollars and cents: #,###0.00)

Question 11

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A corporation issues a bond today with a $1,000 face value, maturity in 25 years, and an 8% coupon interest rate; interest is paid annually. An investor purchases the bond for $1,000. What is the yield to maturity?

Question 12

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A level coupon bond paying 8% interest semi-annually has a face value of $1,000 and 10 years left to maturity. If the present market rate of interest is 6%, what is the present value of the bond?

Question 13

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A company pays a current dividend (D₀) of $1.20 per share on its common stock. The annual dividend will increase by 3%, 4% and 5%, respectively, over the next three years, and then by 6% thereafter. The appropriate discount rate is 12%. What is the current price of the stock?

Question 14

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A company's dividend this year is $2.25 per share, and dividends are expected to grow at 12% for the next four years and at 5% indefinitely after that. If the firm's discount rate is 8%, what is the value of one share today?