Author Question: ND Electric Company issued 1,000 bonds that have an annual coupon rate of 6.5. The present market ... (Read 54 times)

Tazate

  • Hero Member
  • *****
  • Posts: 532
ND Electric Company issued 1,000 bonds that have an annual coupon rate of 6.5. The present
  market value of the bonds is 1,225. If the bonds have 17 years remaining until maturity, what is
  the current yield on ND Electric Company bonds?
 
  A) 6.5 B) 13.2 C) 7.2 D) 5.3

Question 2

The price of DDS Corporation stock is expected to be 45 in 5 years. Dividends are anticipated to increase at an
  annual rate of 10 percent from the most recent dividend of 1.00.
 
  If your required rate of return is 15 percent,
  how much are you willing to pay for DDS stock?


TheNamesImani

  • Sr. Member
  • ****
  • Posts: 334
Answer to Question 1

D

Answer to Question 2

The expected cash flows are the future dividends plus the future selling price,
Year D PV  15
1 1.10 .96
2 1.21 .91
3 1.33 .88
4 1.46 .84
5 1.61 .80
4.39 =PV of dividends only
P = 4.39 + (68/(1.155 = 22.37 ) = 26.76



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

Malaria was not eliminated in the United States until 1951. The term eliminated means that no new cases arise in a country for 3 years.

Did you know?

Nearly 31 million adults in America have a total cholesterol level that is more than 240 mg per dL.

Did you know?

When taking monoamine oxidase inhibitors, people should avoid a variety of foods, which include alcoholic beverages, bean curd, broad (fava) bean pods, cheese, fish, ginseng, protein extracts, meat, sauerkraut, shrimp paste, soups, and yeast.

Did you know?

Allergies play a major part in the health of children. The most prevalent childhood allergies are milk, egg, soy, wheat, peanuts, tree nuts, and seafood.

Did you know?

Medications that are definitely not safe to take when breastfeeding include radioactive drugs, antimetabolites, some cancer (chemotherapy) agents, bromocriptine, ergotamine, methotrexate, and cyclosporine.

For a complete list of videos, visit our video library