Consider the following bond issues: Bond A: 5% 15-year bond Bond B: 5% 30-year bond Neither bond has an embedded option. Both bonds are trading in the market at the same yield. Which bond will ﬂuctuate more in price when interest rates change? Why

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Written at December 29, 2022 on English with a size of 12.38 KB.

If you can purchase a municipal bond which returns 5.6%

Municipal Bond not tax

and you are in the 25% tax bracket, what rate of

Corporate are taxed

return would you require on a corporate bond?

TEY= Municipal Rate/ (1 - Tax rate)

7.47%

=5.6%/(1-25%)

TEY= 5.6%/ (1 - 25%)

Municipal has lower interest rate

Analysts have forecasted Gamemasters will grow at a rate of

8% into the future. Gamemasters recently paid a dividend of $2.15

and investors require a return of 14.5%. What is the value of this

stock?

p0= Dividend * (1+ Grow rate)/(Interest-Grow rate)

35.72307692

=2.15*(1+8%)/(14.5%-8%)

You are interested in a fast-expanding company that is currently

growing at a rate of 30% and is expected to continue to grow

at that rate for another three years before slowing down to a

rate of 7.5%. If investors expect a return of 12% and the

company recently paid a dividend of $1.75, what is the

value of the stock?

(1+I)^nDiv(0)$1.75 I+GCF(1)DiscountDCFG130% 1.30 2.28 =1.75*D291.12 =(1+12%)^1 2.03 =E29/G29G27.50% 1.30 2.9575=E29*D301.2544=G29^22.357700893=E30/G30i12% 1.30 3.84 =E30*D311.404928 =G29^3 2.74 =E31/G3191.84680556=B341.404928=G3165.37474202=E32/G32Stock

72.50 =SUM(I29:I32)91.84680556

What is the years to maturity on a bond issued November 1, 2001, and due November 1,

65.50

=NPV(12%,E29,E30,E31,E32)

5 years11/1/202111/2/20165.0000

What is the price of a zero coupon bond that was issued for $1,000 and

matures in 14 years if the market interest rate is 9%? (Calculate as semi-annual)

rate0.045=9%/2nper 28.00 =14*2pmt0%pv

($291.57)

=PV(B44,B45,B46,B48)

fv$1,000.00

The Dow Jones closed at 18,641 on November 2, 2016 which was up 311 points

from the day before. What was the percentage change?

% change= New-Old/Old

18,330.00=18641-311

1.70%

=(18641-18330)/18330

Dell Computers reported earnings per share to be $5.85 this year. If the

company P/E ratio is 28, what is the price of the stock?

Price= P/E*EPS

163.80=5.85*28

A TIPS bond was issued with a CPI of 122.69 and a coupon of 6.5%.

One year later the CPI is 128.32. What is the par value of the bond

and how much interest will be paid (assume semi-annual interest).

CPI start122.69CPI end128.32coupon 6.50%

Value of bond =Before 1000 (bonds always 1000)

Par 1,045.89

=1000* 128.32/122.69

Interest 33.99136034

=B73*6.5%/2

What is the current yield on a bond quoted at 98.91 if the

bond pays a coupon of 6.54%?

Quote 98.91Price 989.1

=1000*98.91/100

Coupon 6.54%Interest 65.40

=6.54%*1000

Current Yld6.61%

=65.4/989.1

If you buy 200 shares of a stock with bid and ask prices of

$77.23 and $77.28, respectively, how much will you pay?

No.200Price$77.28

Value $15,456.00

=B88*B89

If Home Depot has an 8.75% preferred stock with a par

value of $100, what would you pay if the market rate is

6.5%.Dividend $8.75Market rt 6.50%

value $134.62

Div/martk

You own a callable bond that pays 10% annual coupon

and it has a one-year interest penalty if it is called early.

If it is called early, how much will you receive?

Coupon 10%Pay $ 1,100.00

=1000*(1+10%)

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Consider the following bond issues: Bond A: 5% 15-year bond Bond B: 5% 30-year bond Neither bond has an embedded option. Both bonds are trading in the market at the same yield. Which bond will ﬂuctuate more in price when interest rates change? Why What is