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##### Austin Power Co. bonds have a 14% annual coupon rate.

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solution

**Question**

8) Austin Power Co. bonds have a 14% annual coupon rate. Interest is paid semi-annually. The bonds have a par value of $1,000 and will mature 10 years from now. If the (annual) required rate of return is 12%, what is the price of the Austin Power bonds? [Hint: you need to convert your coupon rate, your number of periods, n, and your req. rate of ret. to a semi-annual basis.];9) Consider a $1,000 par value bond with a 9 percent annual coupon that is currently selling for $943. The bond pays interest annually. There are 15 years remaining until maturity.;a) What is the size of the annual coupon payments?;b) What is the current yield on the bond?;10) A preferred share of Phillips, Co. is currently selling for $65.00 on the New York Stock Exchange. If this instrument pays a dividend of $5 a year, what is its yield?;11) Assume that you plan to buy a share of IBM stock today and to hold it for 2 years. Your expectations are that you?ll receive a dividend of 19.00 at the end of Year 1 and a dividend of $19.25 at the end of Year 2. In addition, you expect to sell the stock for $150 at the end of Year 2. If your expected rate of return is 11 percent, how much should you be willing to pay for this stock today?;12) A share of common stock has just paid a dividend of $2.00. If the expected long-run growth rate for this stock is 15 percent, and if investors require a 19 percent rate of return, what is the price of the stock?

Paper#25762 | Written in 18-Jul-2015

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