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If the required rate of return for each stock is 12.00%, what is the stock price for each of the stocks?

Consider the following three stocks:
▪ Stock A is expected to provide a dividend of $12.10 a share forever.
▪ Stock B is expected to pay a dividend of $6.10 next year. Thereafter, dividend growth
is expected to be 5.00% a year forever.
▪ Stock C is expected to pay a dividend of $4.90 next year. Thereafter, dividend growth
is expected to be 21.00% a year for five years (i.e., years 2 through 6) and zero
thereafter.
If the required rate of return for each stock is 12.00%, what is the stock price for each of
the stocks?

What is Pharmecology’s current stock price?

Pharmecology just paid an annual dividend of $1.90 per share. It’s a mature company,
but future EPS and dividends are expected to grow with inflation, which is forecasted
at 4.70% per year. The nominal cost of capital is 11.35%.
a. What is Pharmecology’s current stock price?
b. What would be Pharmecology’s current stock price using forecasted real dividends
and a real discount rate?

Company Z’s earnings and dividends per share are expected to grow indefinitely by 3% a year. If next year’s dividend is $9 and the cost of capital is 13%, what is the current stock price?

What is the bond’s price if it is rated as Aaa?

A bond’s credit rating provides a guide to its price. Assume Aaa bonds yield 3.8% and
Baa bonds yield 4.7%. Assume a 10% six-year bond with annual coupons and a face
value of $1,000.
a. What is the bond’s price if it is rated as Aaa?
b. What is the bond’s price if it is rated as Baa?

What is the yield to maturity of each bond?

Assume coupons are paid annually. Here are the prices of three bonds with 10-year
maturities. Assume face value is $100.
Bond coupon (%) Price (%)
3 87.00
5 106.00
9 137.00
a. What is the yield to maturity of each bond?
b. What is the duration of each bond?

Suppose that one year later the bond still yields 3.8%. What return has the bondholder earned over the 12-month period?

A government bond matures in 4 years, makes annual coupon payments of 5.8% and
offers a yield of 3.8% annually compounded. Assume face value is $1,000.
a. Suppose that one year later the bond still yields 3.8%. What return has the bondholder
earned over the 12-month period?
b. Now suppose that the bond yields 2.9% at the end of the year. What return did the
bondholder earn in this case?

The 7.9%, 5-year bond yields 5.9%. If this yield to maturity remains unchanged, what will be its price one year after?

The 7.9%, 5-year bond yields 5.9%. If this yield to maturity remains unchanged, what will be its price one year after? Assume annual coupon payments and a face value of $1,000. What is the total return to an investor who held the bond over this year?

What is the present value of the bond?

A 3-year U.S. Treasury bond with a face value of $1,000 pays a coupon of 6.25%. Coupon
is to be paid semi-annually. The reported annual yield to maturity is 6.8%. Solve the
following questions:
a. What is the present value of the bond?
b. What is the duration of the bond?
c. If the yield to maturity changes to 2%, what will be the present value?
d. If the yield to maturity changes to 7%, what will be the present value?
e. If the yield to maturity changes to 16%, what will be the present value?

What is the connection between the phenomenon of the self-fulfilling prophecy and your success or disappointment in performing a challenging task?

What is the connection between the phenomenon of the self-fulfilling prophecy and your success or disappointment in performing a challenging task? Share with your classmates one incident in which the self-fulfilling prophecy you have imposed on yourself has affected your communication.