Question 1:Given the following information what is the percentage change in the price of the bonds if interest rates suddenly rise by 7%?

Wing Air Inc.
Coupon rate	7%
Settlement date	1/1/2000
Maturity date	1/1/2002
Face value	1,000
# of coupons per year	2
Airfoil, Inc.
Coupon rate	7%
Settlement date	1/1/2000
Maturity date	1/1/2015
Face value	1,000
# of coupons per year	2
Change in interest rate	7%

Wing Air 14.00%, Airfoil -93.52%

Wing Air -23.71%, Airfoil -48.52%

Wing Air -12.03%, Airfoil -43.61%

Wing Air -11.86%, Airfoil -43.43%

Question 2: Cavu Air Inc., issued 15 Year bonds 2 years ago at a coupon rate of 6.40% percent. The bonds make semi annual payments. If these bonds currently sell for 105 percent of par value, what is the YTM?

Settlement date	1/1/2000
Maturity date	1/1/2013
Annual coupon rate	6.40%
Coupons per year	2
Face value (% of par)	100
Bond price (% of par)	105

6.10%

6.65%

6.40%

5.85%

Question 3: Contrail Air Inc., Just paid a dividend of $5.00 per share on its stock. The dividends are expected to grow at a constant rate of 7% percent per year, indefinitely. If investors require a return of 15% percent, what is the current price?

Dividend paid	$5.00
Dividend growth rate	7%
Required return	15%
Requested year	0

58.41

58.13

(66.88)

66.88

Question 4: Airfoil, Inc. announced yesterday that they earned $27,000,000 million this year. They also stated the firm's return on equity is 12% percent. Airfoil retains 60% percent of their earnings. What is the firms earnings growth rate?

Earnings	$27,000,000
ROE	12%
Retention ratio	60%

72.00%

48.00%

20.00%

7.20%