1. You are evaluating a bond that pays a 10% coupon on an annual basis. The par value is $1000 and your required rate of return is 12%. How much would you be willing to pay for this bond?
2. A stock currently pays a $3.50 dividend, and this dividend is expected to remain constant for the foreseeable future. If your required rate is 10%, and the par is $50, what is the current value of the stock?
3. You are evaluating a stock for potential investment. It is expected to pay a dividend of $4 next year. If your required rate is 12%, and the stock is expected to grow at a rate of 5% per year for the foreseeable future, what is your estimate of the value of the stock?
4. You have estimated that a stocks dividend will decline by 8% next year, but then recover to grow at 18% the second year, then settle into 4% growth each year after that. If the current dividend is $5, and your required rate is 15%, what would you pay for the stock?