1) A 12 year bond is bought for $5000 to be held until next year and then -sold. The bond pays monthly coupons at the annual coupon rate of 10.58%. During the course of the year, the market interest rate falls to 9.21% from 10.58%. What is the one year period rate of return on this bond?
2. A company X promises to maintain dividends of $1.5 per share on its preferred stock, indefinitely. The stock currently sells at $37.39 per share. What is the required return on the stock?
3. An investor with a 7 year investment horizon needs to derive a stock price for a security that will pay a dividend this year of $1.23 per share. The firms's dividends are expected to grow at 15.1% annually for the next 3 years, at 8.4% for the following two years and at 2.9% from that point. If the required return is 8.89% given the known risks of the investment involved, what is the resulting price of an equity share?
2. A company X promises to maintain dividends of $1.5 per share on its preferred stock, indefinitely. The stock currently sells at $37.39 per share. What is the required return on the stock?
3. An investor with a 7 year investment horizon needs to derive a stock price for a security that will pay a dividend this year of $1.23 per share. The firms's dividends are expected to grow at 15.1% annually for the next 3 years, at 8.4% for the following two years and at 2.9% from that point. If the required return is 8.89% given the known risks of the investment involved, what is the resulting price of an equity share?
