A Bond currently sells for $965. The coupon rate on the bond is 6%.

| February 25, 2017

Question

Create an Excel document, Work each problem,WHICH MUST BE CARRIED TO 4 DECIMAL PLACES for accuracy!

1. A Bond currently sells for $965. The coupon rate on the bond is 6%. The bond matures in 12 years. What is the current yield by the prevailing market rate?

2. A bond currently has a coupon rate of 9.16%. The prevailing yield rate on the bond is 7.25%. If the bond has 16 years to maturity, what is the current price of the bond on the market?

3. If you have a 15-year bond, issued 2 years ago at a coupon rate of 8.2%. If the bonds currently sell for $1120 what is the current prevailing rate of interest return expected on this type of bond?

4. Suppose you purchase Bond T, a 7% coupon, 15 year bond today at first issuance. If interest rates rise to 8.675%, what is the value of your bond?

STOCK SECTION
Industry A stock valuations

5. LS Solutions stock currently trades at $38.92 per share. They paid $1.05 per share in dividends last year, and expect those dividends to increase at a rate of growth of 4.54%. Calculate the expected rate of return on this stock.

6. Residential Painting, a competitor in the Northwest Painting Co. expects 5.8%growth, and recently paid a dividend of $1.28. The expected rate of return is 9.5%. What priceshould you be willing to pay for RI stock?

7. TShoemate Construction , another competitor, but in a different region of the US trades around $26.12, expects 5% growth in its dividends and just paid a dividend of $1.11. Solve for the rate of returnexpected in the market.

RESPOND to each of these questions, with a paragraph of explanation to demonstrate your understanding of stock values and returns.

Which of these three stocks would you buy if your decision was made based on dividends and WHY?

Which of the three stocks if your decision was made based on rate of return?

Which of the three stocks if your decision was made based on growth of dividends?

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