Suppose the following bond quote for IOU Corporation appears in the financial page of today’s newspaper. Assume the bond has a face value of $1,000, and the current date is April 19, 2022.Company (Ticker)CouponMaturityLast PriceLast YieldEstimated Volume (000s)IOU (IOU)6.85April 19, 203692.741??73What is the yield to maturity of the bond?What is the current yield?You purchase a bond with a coupon rate of 7.6 percent, a par value of $1,000, and a clean price of $910. If the next semiannual coupon payment is due in five months, what is the invoice price?Five Star Corporation will pay a dividend of $4.15 per share next year. The company pledges to increase its dividend by 6.25 percent per year, indefinitely. If you require a return of 9 percent on your investment, how much will you pay for the company’s stock today? Fegley, Incorporated, has an issue of preferred stock outstanding that pays a $5.90 dividend every year, in perpetuity. If this issue currently sells for $80.55 per share, what is the required return? E-Eyes.com has a new issue of preferred stock it calls 20/20 preferred. The stock will pay a $20 dividend per year, but the first dividend will not be paid until 20 years from today. If you require a return of 8.75 percent on this stock, how much should you pay today? The stock price of Fujita Company is $53.70. Investors require a return of 15 percent on similar stocks. If the company plans to pay a dividend of $3.50 next year, what growth rate is expected for the company’s stock price? Premier, Incorporated, has an odd dividend policy. The company has just paid a dividend of $11.25 per share and has announced that it will increase the dividend by $9.25 per share for each of the next four years, and then never pay another dividend. If you require a return of 13 percent on the company’s stock, how much will you pay for a share today? McCabe Corporation is expected to pay the following dividends over the next four years: $5.40, $16.40, $21.40, and $3.20. Afterward, the company pledges to maintain a constant 6 percent growth rate in dividends forever. If the required return on the stock is 9 percent, what is the current share price? Synovec Corporation is growing quickly. Dividends are expected to grow at a rate of 32 percent for the next three years, with the growth rate falling off to a constant 6.2 percent, thereafter. If the required return is 14 percent and the company just paid a dividend of $2.85, what is the current share price? The Dahlia Flower Company has earnings of $1.44 per share.If the benchmark PE for the company is 13, how much will you pay for the stock?If the benchmark PE for the company is 16, how much will you pay for the stock?

Information Provided: Par value = $1000 Bond maturity = 14 years (2036-2022) Coupon rate = 6.85%…

Answered: What is the yield to maturity of the…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 9P

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Suppose the following bond quote for IOU Corporation appears in the financial page of today’s newspaper. Assume the bond has a face value of $1,000, and the current date is April 19, 2022.

Company (Ticker)	Coupon	Maturity	Last Price	Last Yield	Estimated Volume (000s)
IOU (IOU)	6.85	April 19, 2036	92.741	??	73

What is the yield to maturity of the bond?

What is the current yield?

You purchase a bond with a coupon rate of 7.6 percent, a par value of $1,000, and a clean price of $910. If the next semiannual coupon payment is due in five months, what is the invoice price?
Five Star Corporation will pay a dividend of $4.15 per share next year. The company pledges to increase its dividend by 6.25 percent per year, indefinitely. If you require a return of 9 percent on your investment, how much will you pay for the company’s stock today?

Fegley, Incorporated, has an issue of preferred stock outstanding that pays a $5.90 dividend every year, in perpetuity. If this issue currently sells for $80.55 per share, what is the required return?

E-Eyes.com has a new issue of preferred stock it calls 20/20 preferred. The stock will pay a $20 dividend per year, but the first dividend will not be paid until 20 years from today. If you require a return of 8.75 percent on this stock, how much should you pay today?

The stock price of Fujita Company is $53.70. Investors require a return of 15 percent on similar stocks. If the company plans to pay a dividend of $3.50 next year, what growth rate is expected for the company’s stock price?

Premier, Incorporated, has an odd dividend policy. The company has just paid a dividend of $11.25 per share and has announced that it will increase the dividend by $9.25 per share for each of the next four years, and then never pay another dividend. If you require a return of 13 percent on the company’s stock, how much will you pay for a share today?

McCabe Corporation is expected to pay the following dividends over the next four years: $5.40, $16.40, $21.40, and $3.20. Afterward, the company pledges to maintain a constant 6 percent growth rate in dividends forever. If the required return on the stock is 9 percent, what is the current share price?

Synovec Corporation is growing quickly. Dividends are expected to grow at a rate of 32 percent for the next three years, with the growth rate falling off to a constant 6.2 percent, thereafter. If the required return is 14 percent and the company just paid a dividend of $2.85, what is the current share price?

The Dahlia Flower Company has earnings of $1.44 per share.

If the benchmark PE for the company is 13, how much will you pay for the stock?

If the benchmark PE for the company is 16, how much will you pay for the stock?

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