Question
The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 10 years. The bond certificate indicates that the
The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 10 years. The bond certificate indicates that the stated coupon rate for this bond is 8% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 11.9%, then the price that this bond trades for will be closest to:
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$931
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$775
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$1,086
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$620
2-) JRN Enterprises just announced that it plans to cut its next-year dividend, D1, from $2.75 to $1.50 per share and use the extra funds to expand its operations. Prior to this announcement, JRN's dividends were expected to grow at 4% per year and JRN's stock was trading at $25.00 per share. With the new expansion, JRN's dividends are expected to grow at 8% per year indefinitely. Assuming that JRN's risk is unchanged by the expansion, the value of a share of JRN after the announcement is closest to:
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$25.00
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$39.29
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$21.43
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D. 13.64
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