I’m studying for my Business class and need an explanation.
Reddick Enterprises’ stock currently sells for $24.50 per share. The dividend is projected to increase at a constant rate of 5.50% per year. The required rate of return on the stock, rs, is 9.00%. What is the stock’s expected price 3 years from today?
Select one:
a. $24.45
b. $31.65
c. $28.77
d. $33.66
e. $26.76
Question 2
Question text
McCue Inc.’s bonds currently sell for $1,175. They pay a $90 annual coupon, have a 25-year maturity, and a $1,000 par value, but they can be called in 5 years at $1,050. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. What is the difference between this bond’s YTM and its YTC? (Subtract the YTC from the YTM; it is possible to get a negative answer.)
Select one:
a. 1.74%
b. 1.26%
c. 1.47%
d. 1.68%
e. 1.88%
Question 3
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If D0 = $1.75, g (which is constant) = 3.6%, and P0 = $40.00, then what is the stock’s expected total return for the coming year?
Select one:
a. 7.64%
b. 7.48%
c. 6.42%
d. 8.13%
e. 9.92%
Question 4
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Goode Inc.’s stock has a required rate of return of 11.50%, and it sells for $29.00 per share. Goode’s dividend is expected to grow at a constant rate of 7.00%. What was the last dividend, D0?
Select one:
a. $0.95
b. $1.38
c. $1.06
d. $1.22
e. $1.37
Question
Question text
Malko Enterprises’ bonds currently sell for $1,020. They have a 6-year maturity, an annual coupon of $75, and a par value of $1,000. What is their current yield?
Select one:
a. 6.40%
b. 8.46%
c. 6.91%
d. 6.62%
e. 7.35%
Question 6
Question text
Ryngaert Inc. recently issued noncallable bonds that mature in 15 years. They have a par value of $1,000 and an annual coupon of 5.7%. If the current market interest rate is 7.0%, at what price should the bonds sell?
Select one:
a. $802.25
b. $881.60
c. $1,040.28
d. $1,013.84
e. $775.81
Question 7
Question text
Moerdyk Corporation’s bonds have a 15-year maturity, a 7.25% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 5.00%, based on semiannual compounding. What is the bond’s price?
Select one:
a. $1,457.85
b. $976.02
c. $1,050.15
d. $1,235.47
e. $1,359.01
Question 8
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Companies can issue different classes of common stock. Which of the following statements concerning stock classes is CORRECT?
Select one:
a. Some class or classes of common stock are entitled to more votes per share than other classes.
b. All common stocks fall into one of three classes: A, B, and C.
c. All common stocks, regardless of class, must have the same voting rights.
d. All common stock, regardless of class, must pay the same dividend.
e. All firms have several classes of common stock.
Question 9
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A stock just paid a dividend of D0 = $1.50. The required rate of return is rs = 14.1%, and the constant growth rate is g = 4.0%. What is the current stock price?
Select one:
a. $19.15
b. $15.45
c. $12.82
d. $18.84
e. $12.97
Question 10
Question text
Morin Company’s bonds mature in 8 years, have a par value of $1,000, and make an annual coupon interest payment of $65. The market requires an interest rate of 6.1% on these bonds. What is the bond’s price?
Select one:
a. $1,280.93
b. $1,096.47
c. $1,147.71
d. $1,116.97
e. $1,024.74
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