« previous next »

Author Question: ND Electric Company issued 1,000 bonds that have an annual coupon rate of 6.5. The present market ... (Read 173 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?

Though the United States has largely rejected the metric system, it is used for currency, as in 100 pennies = 1 dollar. Previously, the British currency system was used, with measurements such as 12 pence to the shilling, and 20 shillings to the pound.

Did you know?

A strange skin disease referred to as Morgellons has occurred in the southern United States and in California. Symptoms include slowly healing sores, joint pain, persistent fatigue, and a sensation of things crawling through the skin. Another symptom is strange-looking, threadlike extrusions coming out of the skin.

Did you know?

The calories found in one piece of cherry cheesecake could light a 60-watt light bulb for 1.5 hours.

Did you know?

Dogs have been used in studies to detect various cancers in human subjects. They have been trained to sniff breath samples from humans that were collected by having them breathe into special tubes. These people included 55 lung cancer patients, 31 breast cancer patients, and 83 cancer-free patients. The dogs detected 54 of the 55 lung cancer patients as having cancer, detected 28 of the 31 breast cancer patients, and gave only three false-positive results (detecting cancer in people who didn't have it).

Did you know?

There are over 65,000 known species of protozoa. About 10,000 species are parasitic.

Variation in the rate of evolution as a function of the strength of selection, assuming genetic drif Variation in the rate of evolution as a function of the strength of selection, assuming genetic drif
The rate of evolution in short­ and long­lived plants The rate of evolution in short­ and long­lived plants
Time Line of Human History From Upper Paleolithic Period to the Present Time Line of Human History From Upper Paleolithic Period to the Present
High rates of rural poverty have been a part of the United States from its origin to the present. ... High rates of rural poverty have been a part of the United States from its origin to the present. ...
. Calculate the net electric field at point B . Calculate the net electric field at point B
In a Millikan experiment, a 6.89E-14 kg charged oil droplet is suspended in the electric field ... In a Millikan experiment, a 6.89E-14 kg charged oil droplet is suspended in the electric field ...
Video: Studying the Left and Right Brain Independently

For a complete list of videos, visit our video library