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Chapter 10: Please discuss these questions below and talk about how these topics
Chapter 10: Please discuss these questions below and talk about how these topics can be practically applied in our daily lives.
1 .What is a junk bond?
2 .Briefly describe interest income within the context of bond investments.
3 . Briefly describe the two types of cash flow that a bondholder will receive from the issuer.
4 .What is an inverted yield curve, and what is its significance?
5 . Describe reinvestment risk for a bondholder.
1. In the efficient market hypothesis (EMH), describe what is meant by the terms weak form efficiency, semi-strong form efficiency, and strong form efficiency. How do these forms of market efficiency differ from each other, and what are their characteristics?
2. What is meant by the term random walk, and how does this concept relate to the EMH?
Please respond to all questions with a minimum of 3-4 sentences each. MLA format/ show work where necessary
1 .A $1,000 Expo Corp. bond has a coupon rate of 5%, pays interest semiannually, and matures in six years. If the yield to maturity is 7%, what is the bond’s value today?
2 . A $1,000 Omega Corp. bond has an 8% coupon rate that is paid semiannually. The bond matures in three years. If the current price of the bond is $1,125, what is the yield to maturity?
3 . You are considering buying a bond that is currently priced at $830, has a face value of $1,000, and matures in seven years. If interest is paid semiannually and the bond has a yield to maturity of 6%, what is the bond’s annual coupon rate?
4 . A $1,000 Noah Corp. bond has a coupon rate of 5% with semiannual payments, matures in 10 years, and has a yield to maturity of 6.5%. What is the bond’s current price?
5 . Chronowerx Inc. has issued a bond that has a face value of $1,000, a 3% coupon rate (with semiannual interest), and a maturity date four years from now. If the bond’s current price is $895, what is its yield to maturity?
6 . You are considering adding a $1,000, 25-year bond to your portfolio. It has a coupon rate of 8%, which is paid annually, and your required return is 10%. What is the current price of the investment?
7 . A Cameron Corp. bond has a $1,000 par value, a 5 percent coupon rate paid semiannually, and nine years until maturity. If similar investments yield 6%, what is the current value of Cameron Corp. bonds?
8 . McLaren Motors just issued a series of $1,000.00 bonds with a 10-year maturity and an 8% coupon rate, paid quarterly. If you purchase a McLaren bond at a price of $920.00, what is your required rate of return?
9 . Three years ago, Petty Partners Inc. issued 15-year, $1,000 bonds that are currently priced at $911.37. If the prevailing rate of return on similar investments is 5%, what is the coupon rate on Petty Partners bonds, and what is the annual interest payment?
10 . A $1,000 Riker Corp. bond has a 20-year maturity and a 6% coupon rate, with interest paid annually. If similar bonds from Riker Corp. are yielding 4%, what is the current market value of the Riker issue?
11 .A $1,000 bond that matures in eight years, has quarterly coupon payments of $25, and is currently priced at $962.00 will have a yield to maturity of ________.
1.Today, Sysco Enterprises paid dividends on its common stock of $1.25 per share. If dividends per share are expected to increase to $3.50 per share six years from now, what is the percentage dividend growth rate?
2. Let’s say you want to purchase shares of Fontaine Ltd. and then hold this stock for six years. The company has a stated dividend policy of $2.00 annually per share for the next six years, at the end of which time you will sell the stock. You expect to be able to sell the stock for $35.00 at that time. If you want to earn an 8% return on this investment, what price should you pay today for this stock?
3. Damian Painting Systems has established a dividend policy of $3.00 per share per year. If the company plans to be in business forever, what is the value of this stock if an investor wants a 10% return?
4 . Wilk Productions wants its shareholders to earn a 12% return on their investment in the company. At what value would Wilk stock be priced if the company paid $2.75 per share in constant annual dividends forever?
5. Dax Industrial Systems has stock currently priced at $50.00 per share. If investors are earning a 7% return on Dax Industrial, what is the company’s annual dividend payment per share?
6. If a stock is selling at $400 with a current dividend of $40 and a potential investor’s required rate of return is 15%, what would be the anticipated dividend growth rate?
7. Mind Max Inc. has a dividend policy that increases annual dividends by 3% each year. If last year’s dividend was $2.00, the company intends to stay in business for 50 years, and an investor wants a 9% return, what would be the price of Mind Max stock?
8. Odon Corp. paid dividends today in the amount of $1.50 per share. If Odon will pay dividends of $5.00 10 years from today, what is the annual dividend growth rate over this 10-year period?
9. The Kirkson Distributors common stock is currently selling at $52.00 per share, pays dividends annually at $2.50 per share, and has an annual dividend growth rate of 2%. What is the required return?
10. If a preferred share of stock pays dividends of $2.50 per year and the required rate of return for the stock is 6%, what is its intrinsic value?
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