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HW FIN 3331

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HW FIN 3331 Chapter 9 9.1. Warr Corporation just paid a dividend of $1.50 a share (that is, D0 = $1.50). The dividend is expected to grow 7% a year for 3 years and then at 5% a year thereafter. What is the expected dividend per share for each of the next 5 years? D0 = $1.50; g1-3 = 7%; gn = 5%; D1 through D5 = ? D1 = D0(1 + g1) = $1.50(1.07) = $1.6050. D2 = D0(1 + g1)(1 + g2) = $1.50(1.07)2 = $1.7174. D3 = D0(1 + g1)(1 + g2)(1 + g3) = $1.50(1.07)3 = $1.8376. D4 = D0(1 + g1)(1 + g2)(1 + g3)(1 + gn) = $1.50(1.07)3(1.05) = $1.9294. D5 = D0(1 + g1)(1 + g2)(1 + g3)(1 + gn)2 = $1.50(1.07)3(1.05)2 = $2.0259. 9.2. Thomas Brothers is expected to pay $0.50 per share dividend at the end of the year (that is, D1 = $0.50). The dividend is expected …show more content…

Chapter 7 7.1 Callaghan Motors bonds have 10 years remaining to maturity.Interest is paid annually, they have a 1000 par value, the coupon interest rate is 8%, and the yeild to maturity is 9%. What is the bond's current market price? Solution: PV factor of sum = (1+i)^-n = (1+9%)^-10 =1.09^-10 = 0.4224 PV factor of annuity = 1 - (1+i)^-n / i = 1 - (1+9%)^-10 / 9% = 1 - 0.4224 / 9% = 0.5775 / 9% = 6.417 = PV factor of Sum * Par Value + PV factor of annuity * coupon payment = 0.4224 * 1,000 + 6.417 * 80 = 422.4 + 513.3 = 935.76 7.3 Callaghan Motors’ bonds have 10 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 8%. The bonds have a yield to maturity of 9%. What is the current market price of these bonds? Given: TTM = 10 years Par = $1,000 C = 8% ($80) YTM = 9% Price = ? Formula: Using Finance Functions on 12c: n = 10 i = 9(%) PMT = 80 FV = 1000 PV = solve PV = $935.82 P4-2 Wilson Wonders’ bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. e bonds sell at a price of $850. What is their yield to maturity? Given: TTM = 12 years Par = $1,000 C = 10% ($100) Price = $850 YTM = solve Formula: Using Finance Functions on 12c: n = 12 PMT = 100 PV = -850 PMT = 100 i = solve i = 12.4751% Current Market Price = $935.82 Chapter 5 5.1. If you deposit $10,000 in

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