Questions and answers on Finance - Bond Pricing/ Dividend Growth

By Anup Singhania - CPA | CFA L2 | 5K+ students | A++
Bachelors/Undergraduate, Masters/Postgraduate
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HW #3

  1. Firm A issued 12-year bonds with a par value of $1,000 two years ago at a 9 coupon rate, paid semiannually. The yield to maturity on these bonds is 8 percent.
  2. What is the current bond price?
  3. What is the present value of the coupons?
  4. What is the present value of the face value?
  5. Firm B is growing quickly. Dividends are expected to grow at a 25 percent rate for the next three years, with the growth rate falling off to a constant 7 percent thereafter. The required return is 13 percent and the company just paid a dividend of $4.00 on its stock.
  1. What is the dividend at year 4?
  2. What is the stock price at year 3?
  3. Figure out the current stock price based on both the stock price at year 3 and dividends at year 1 through 3?

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