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Questions and answers on Finance - Bond Pricing/ Dividend Growth
By Anup Singhania - CPA | CFA L2 | 5K+ students | A++
Subjects:
Finance
Level:
Bachelors/Undergraduate, Masters/Postgraduate
Types:
Homework
Language used:
English
HW #3
- Firm A issued 12-year bonds with a par value of $1,000 two years ago at a 9 coupon rate, paid semiannually. The yield to maturity on these bonds is 8 percent.
- What is the current bond price?
- What is the present value of the coupons?
- What is the present value of the face value?
- Firm B is growing quickly. Dividends are expected to grow at a 25 percent rate for the next three years, with the growth rate falling off to a constant 7 percent thereafter. The required return is 13 percent and the company just paid a dividend of $4.00 on its stock.
- What is the dividend at year 4?
- What is the stock price at year 3?
- Figure out the current stock price based on both the stock price at year 3 and dividends at year 1 through 3?
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