Week 2 Assignment: FIN/370
Purpose of Assignment
Students should be able to calculate time value of money problems including solving for; present value, future value, rate and payment, determine the value and yield of corporate bonds, and use the dividend discount model to calculate the value and expected return of a common stock.Complete the following Questions and Problems from each chapter as indicated.
Show all work and analysis.
Prepare in Microsoft® Excel® or Word.
- Ch. 5: Questions 3 & 4 (Question and Problems section): Microsoft® Excel® templates provided for Problems 3 and 4
- Ch. 6: Questions 2 & 20 (Questions and Problems section)
- Ch. 7: Questions 3 &11 (Questions and Problems section)
- Ch. 8: Questions 1 & 6 (Questions and Problems section): Microsoft® Excel® template provided for Problem 6
Format your assignment consistent with APA guidelines if submitting in Microsoft® Word.
*The questions and excel documents needed are attached.*
Chapter 5 Questions 3 & 4
3. Calculating Present Values [LO2] For each of the following, compute the present value:
4. Calculating Interest Rates [LO3] Solve for the unknown interest rate in each of the following:
Chapter 6 Questions 2 & 20
2. Stock Values [LO1] The next dividend payment by Halestorm, Inc., will be $2.04 per share. The dividends are anticipated to maintain a growth rate of 4.5 percent forever. If the stock currently sells for $37 per share, what is the required return?
20.Negative Growth [LO1] Antiques R Us is a mature manufacturing firm. The company just paid a dividend of $10.25, but management expects to reduce the payout by 3 percent per year indefinitely. If you require a return of 9.5 percent on this stock, what will you pay for a share today?
Chapter 7 Questions 3 & 11
3. Valuing Bonds [LO2] Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 23 years to maturity, and a coupon rate of 5.8 percent paid annually. If the yield to maturity is 4.7 percent, what is the current price of the bond?
11. Valuing Bonds [LO2] Union Local School District has a bond outstanding with a coupon rate of 3.7 percent paid semiannually and 16 years to maturity. The yield to maturity on this bond is 3.9 percent, and the bond has a par value of $5,000. What is the price of the bond?
Chapter 8 Questions 1 & 6
1. Stock Values [LO1] The Jackson–Timberlake Wardrobe Co. just paid a dividend of $1.95 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. If investors require a return of 10.5 percent on The Jackson–Timberlake Wardrobe Co. stock, what is the current price? What will the price be in three years? In 15 years?
6. Stock Valuation [LO1] Suppose you know that a company’s stock currently sells for $63 per share and the required return on the stock is 10.5 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it’s the company’s policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?