chapter 6
10. Bond Pricing. A 30-year-maturity bond with face value of $1,000 makes annual coupon
payments and has a coupon rate of 8%. What is the bond’s yield to maturity if the bond is
selling for: (LO6-2)
a. $900?
b. $1,000?
c. $1,100?
11. Bond Pricing. A 30-year-maturity bond with face value of $1,000 makes semiannual coupon
payments and has a coupon rate of 8%. What is the bond’s yield to maturity if the bond is selling
for: (LO6-2)
a. $900?
b. $1,000?
c. $1,100?
12. Bond Pricing. The following table shows some data for three zero-coupon bonds. The face
value of each bond is $1,000. (LO6-2)
Bond Price Maturity (years) Yield to Maturity
A $300 30 —
B 300 — 8%
C — 10 10
a. What is the yield to maturity of bond A? (Express your answer as a percentage rather than
a decimal.)
b. What is the maturity of B?
c. What is the price of C?
chapter 7
1. Stock Markets. True or false? (LO7-1)
a. The bid price is always greater than the ask price.
b. An investor who wants to sell his stock immediately should enter a limit order.
c. The sale of shares by a large investor is usually termed a “primary offering.”
d. Electronic Communications Network refers to the automated ticker tape on the New York
Stock Exchange.
2. Stock Quotes. Go to finance.yahoo.com and get trading quotes for IBM. (LO7-1)
a. What are the latest stock price and market cap?
b. What is the bid-ask spread?
c. What are IBM’s dividend payment and dividend yield?
d. What is IBM’s P/E ratio?
3. Stock Quotes. Here is a small part of the order book for Mesquite Foods: (LO7-1)
Bid Ask
Price Size Price Size
103 100 103.5 200
102.5 200 103.8 200
101 400 104 300
99.8 300 104.5 400
a. Georgina Sloberg submits a market order to sell 100 shares. What price will she receive?
b. Norman Pilbarra submits a market order to buy 400 shares. What is the maximum price that
he will pay?
c. Carlos Ramirez submits a limit bid order at 105. Will it execute immediately?
4. P/E Ratios. Favorita Candy’s stock is expected to earn $2.40 per share this year. Its P/E ratio is
18. What is the stock price? (LO7-1)
5. Dividend Yield. BMM Industries pays a dividend of $2 per quarter. The dividend yield on its
stock is reported at 4.8%. What is the stock price? (LO7-1)
13. Preferred Stock. Preferred Products has issued preferred stock with an $8 annual dividend that
will be paid in perpetuity. (LO7-2)
a. If the discount rate is 12%, at what price should the preferred sell?
b. At what price should the stock sell 1 year from now?
c. What are (i) the dividend yield; (ii) the capital gains yield; (iii) the expected rate of return of
the stock?
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