YIELD TO CALL It is now January 1, 2015, and you are considering the purchase of an outstanding bond that was issued in January 1, 2013, It has a 9.5% annual coupon and had a 30-year original maturity. (It matures on December 31, 2042.) There is 5 years of call protection (until December 31, 2017), after which time it can be called at 109that is, at 109% par, or $1,090. Interest rates have declined since it was issued, and it is now selling at 116.575% of par or $1,165.75.

a. What is the yield of maturity? What is the yield to call?

b. If you bought this bond, which return would you actually earn? Explain your reasoning.

c. Suppose the bond had been selling at a discount rather than a premium. Would the yield to maturity have been the most likely return, or would the yield to call have been most likely?

____________________________________________

DPS CALCULATION Warr Corporation just paid a dividend of $1.50 a share (i.e., D₀=$1.50). The dividend is expected to grow 7% a year for the next 3 years and then at 5% a year thereafter. What is the expected dividend per share for each of the next 5 years?

____________________________________________

CONSTATNT GROWTH VALUATION Thomas Brothers is expected to pay a $0.50 per share dividend at the end of the year (i.e., D₁=$0.50). The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock, r_s, is 15%. What is the stocks current value per share?

____________________________________________

CONSTATNT GROWTH VALUATION Harrison Clothiers stock currently sells for $20.00 a share. It just paid a dividend of $1.00 a share (i.e., D₀=$1.00). The dividend is expected to grow at a constant rate of 6% a year. What stock price is expected 1 year from now? What is required rate of return?