« previous next »

Author Question: ND Electric Company issued 1,000 bonds that have an annual coupon rate of 6.5. The present market ... (Read 114 times)

Tazate

  • Hero Member
  • *****
  • Posts: 532
on: Jul 10, 2018
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?
Foundations of Finance ¦ Keown, Petty, Martin ¦ 9th Edition
Buy Test-Bank


TheNamesImani

  • Sr. Member
  • ****
  • Posts: 334
Reply #1 on: Jul 10, 2018
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
« previous next »
 

Did you know?

Many supplement containers do not even contain what their labels say. There are many documented reports of products containing much less, or more, that what is listed on their labels. They may also contain undisclosed prescription drugs and even contaminants.

Did you know?

Pink eye is a term that refers to conjunctivitis, which is inflammation of the thin, clear membrane (conjunctiva) over the white part of the eye (sclera). It may be triggered by a virus, bacteria, or foreign body in the eye. Antibiotic eye drops alleviate bacterial conjunctivitis, and antihistamine allergy pills or eye drops help control allergic conjunctivitis symptoms.

Did you know?

In 1886, William Bates reported on the discovery of a substance produced by the adrenal gland that turned out to be epinephrine (adrenaline). In 1904, this drug was first artificially synthesized by Friedrich Stolz.

Did you know?

Certain topical medications such as clotrimazole and betamethasone are not approved for use in children younger than 12 years of age. They must be used very cautiously, as directed by a doctor, to treat any child. Children have a much greater response to topical steroid medications.

Did you know?

In the United States, there is a birth every 8 seconds, according to the U.S. Census Bureau's Population Clock.

Major Types of Hydrogen Bonds Found in Biomolecular Interactions Major Types of Hydrogen Bonds Found in Biomolecular Interactions
Enzymatic rate enhancements Enzymatic rate enhancements
How to solve rate problems leading to fractional equations (Question 2) How to solve rate problems leading to fractional equations (Question 2)
The level of future emissions is closely linked to the rate of population growth The level of future emissions is closely linked to the rate of population growth
Draw the electric field of: •An electron and proton •Two electrons Draw the electric field of: •An electron and proton •Two electrons
Compute the rate of discount allowed on a rotor-tiller that lists for $341.00 and is sold for ... Compute the rate of discount allowed on a rotor-tiller that lists for $341.00 and is sold for ...
Video: Glomerular filtrate rate: pressures that affect GFR, NFP & GFR and blood composition

For a complete list of videos, visit our video library