Take intermediate calculations to four decimal places (e.g., 1.2345%) and show your final answer to tie decimal places (e.g., $123.45 or 1.23%). 1. (a) Suppose a 6 percent coupon, $1,000 bond with eight years left to maturity is selling for $1,100. What is the yield, assuming that interest is paid quarterly? (3 marks) (b) If, in part (a), the 6 percent coupon was paid semi-annually on the bond, what would the bond sell for, given that the yield remained unchanged [i.e., the investor wants the same annual yield as in (a)]? (2 mark) (c) If, in part (a), the 6 percent coupon was paid monthly on the bond, what would the bond sell for, given that the effective yield remained unchanged [i.e., the investor wants the same effective annual yield as in (a)]? (3 marks) 2. A firm has just issued (on January 1, 2019) a bond that has a face value of $1,000, a coupon rate of 6 percent paid semi-annually (on June 30 and December 31), and matures in 8 years. The bonds were issued with a yield to maturity of 8%. What price were the bonds issued at? Assume that on July 1, 2023, the bond trades to earn an effective yield of 10%. At what price should this bond be trading for on July 1, 2023? (5 marks) PRICE WHEN ISSUED: PRICE ON JULY 1,2023: 3. A Canadian company has a division in Mexico. The Canadian company needs to borrow money for its Mexican division and has the choice of borrowing in Mexico or Canada. The interest rate in Canada is 8 percent and the effective interest rate in Mexico is 15 percent. The current exchange rate is 10 Mexican pesos per Canadian dollar. If you believe that the Canadian dollar will appreciate 5 percent against the Mexican peso over the next 6 months, where should the company borrow? For simplicity, assume that the company wants to borrow $100 dollars for 6 months. (4 marks)4. (a) You are a stock analyst in charge of valuing high-technology firms, and you are expected to come out with buy-sell recommendations for your clients. You are currently analyzing a firm called etalk.com that specializes in internet-based communication. You are expecting explosive growth in this area. However, the company is not currently profitable even though you believe it will be in the future. Your projections are that the firm will pay no dividends for the next 2 years. Three years from now, you expect the stock to pay its first dividend of $1.50 per share. You expect dividends to increase at a rate of 10 percent per year for two years after that. At that point, the industry will start to mature and slow down; dividends will continue to grow but only at a rate of 5 percent per year for the foreseeable future. The stock is priced in the market at $15 per share. If you believe that a fair rate of return on a stock of this type is 12 percent, what is your estimate of the value of the stock, and should you issue a recommendation to buy or to sell? (7 marks) (b) The day after you make your estimate in part (a), new information indicates that things are not going as smoothly as predicted for this business. Your estimates have changed: You expect no dividends for the next 3 years. Four years from now, you expect the stock to pay its first dividend of $1. You estimate dividends will grow at 8% for two years after that. Thereafter, you expect dividends to grow indefinitely at 4%. Given a rate of return of 12 percent, what is your new estimate of the value of the stock, and what is your estimate of the value of the stock, and should you issue a recommendation to buy or to sell (assuming the stock is still priced in the market at $15)