2024 – 11 Bond Pricing A 30 year maturity bond with face value of 1 000 makes semiannual coupon payments and

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?

 13.  Pricing Consol Bonds. Perpetual Life Corp. has issued consol bonds with coupon payments of $60. (Consols pay interest forever and never mature. They are perpetuities.) (LO6-2)

a.  If the required rate of return on these bonds at the time they were issued was 6%, at what price were they sold to the public?

b.  If the required return today is 10%, at what price do the consols sell? 

 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 AskPrice Size Price Size103 100 103.5 200102.5 200 103.8 200101 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) 

14.Constant-Growth Model. Arts and Crafts Inc. will pay a dividend of $5 per share in 1 year. It sells at $50 a share, and firms in the same industry provide an expected rate of return of 14%. What must be the expected growth rate of the company’s dividends? (LO7-2 )