Table 6.1 Annual Coupon Interest Rate (%) Required Years to Bond Par Value ($) Maturity Return (%) 1000 6 100 10 10 500 18 17 15 1. Calculate the current value of Bond L. (See Table 6.1). What will happen to the value/price as the bond approaches maturity? 2. Calculate the current value of Bond M if the time of maturity is six years. (See Table 6.1) 3. Calculate the current value of Bond N. (See Table 6.1). What will happen to value/price as the bond approaches maturity? Chapter 7 Identify whether the key characteristic describes common stock (CS) or preferred stock (PS). 1. Source of financing which places minimum constraints on the firm 2. Used by young firms receiving investment funds from venture capital firms 3. Potential dilution of earnings and voting power 4. Fixed financial obligation 5. Increases the firm's borrowing power 1. 6. May have cumulative and participating features 7. May be convertible into another type of security 8. Last to receive earnings or distribution of assets in the event of bankruptcy 9. Frequently includes a call feature 2. Compute the value of a share of common stock of Lexi's Cookie Company whose most recent dividend was $2.50 and is expected to grow at 3 percent per year for the next 5 years, after which the dividend growth rate will increase to 6 percent per year indefinitely. Assume 10 percent required rate of return. Smith, Inc. stock currently sells for $75 per share. The firm has total assets of $1,000,000 and total liabilities, including preferred stock, of $350,000. If the firm has 10,000 shares 3. of common stock outstanding, What is the book value of each share of common stock? (a)