Answered step by step
Verified Expert Solution
Question
1 Approved Answer
There are some corporation financing questions below, plz give me the answers and explain them, tks~ Bond questions Q1 Bond J is a 4 percent
There are some corporation financing questions below, plz give me the answers and explain them,
tks~
Bond questions Q1 Bond J is a 4 percent coupon bond. Bond K is a 12 percent coupon bond. Both bonds have nine years to maturity, make semiannual payments and have a YTM of 8 percent. Assume the par value of a bond is $1,000. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? (Negative answers should be indicated by a minus sign. Do not round your intermediate calculations. Round your final answers to 2 decimal places. (e.g., 32.16)) Percentage change in price of Bond J Percentage change in price of Bond K What if rates suddenly fall by 2 percent instead? (Do not round your intermediate calculations. Round your final answers to 2 decimal places. (e.g., 32.16)) Percentage change in price of Bond J Percentage change in price of Bond K What does this problem tell you about the interest rate risk of lower coupon bonds? Q2 Airbutus Co. wants to issue new 20-year bonds for some much-needed expansion projects. The company currently has 8 percent coupon bonds on the market that sell for $930, make semiannual payments, and mature in 20 years. What coupon rate should the company set on its new bonds if it wants them to sell at par? Assume the par value of a bond is $1,000. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) Coupon rate Stock value questions Q1 Goulds Corp. pays a constant $9.75 dividend on its stock. The company will maintain this dividend for the next 11 years and will then cease paying dividends forever. If the required return on this stock is 10 percent, what is the current share price? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Current share price $ Q2 Talcville Farms just paid a dividend of $3.50 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year indefinitely. Investors require a return of 14 percent for the first three years, a return of 12 percent for the next three years, and a return of 10 percent thereafter. What is the current share price? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Current share price $ Q3 Kelligrews Inc., has an odd dividend policy. The company has just paid a dividend of $6 per share and has announced that it will increase the dividend by $4 per share for each of the next 5 years, and then never pay another dividend. If you require a return of 11 percent on the company's stock, how much will you pay for a share today? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Current share price $ Q4 Duffs Co. is growing quickly. Dividends are expected to grow at a 30 percent rate for the next three years, with the growth rate falling off to a constant 6 percent thereafter. If the required return is 13 percent and the company just paid a $1.80 dividend, what is the current share price? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Current share price $ Q5 Peachytown Bank just issued some new preferred stock. The issue will pay a $20 annual dividend in perpetuity, beginning 20 years from now. If the market requires a 6.4 percent return on this investment, how much does a share of preferred stock cost today? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Stock price $Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started