1. The 9-percent-coupon-rate bonds of the Melbourne Mining Company have exactly 15 years remaining to maturity. The current market value of one of these $1,000-par- value bonds is $700. Interest is paid semiannually. Melanie Gibson places a nominal annual required rate of return of 14 percent on these bonds. What dollar intrinsic value should Melanie place on one of these bonds (assuming semiannual discounting)?
2. Just today, Fawlty Foods, Inc.'s common stock paid a $1.40 annual dividend per share and had a closing price of $21. Assume that the market's required return, or capitaliza- tion rate, for this investment is 12 percent and that dividends are expected to grow at a constant rate forever.
3. Calculate the implied growth rate in dividends.
4. What is the expected dividend yield?
5. What is the expected capital gains yield?