yield to maturity
1. Ginko Inc.
has bonds outstanding that mature in 20 years. The bonds have $1000 par value,
pay interest annually at a rate of 10 percent, and have a current selling price
of $875.25. What is the yield to maturity?
2. A share
of common stock just paid a dividend of $3.25 per share. The expected long-run
growth rate for this stock is 18%. If investors require a rate of return of
24%, what should the price of the stock be?
3. Vertex
bonds have a maturity value of $1000. The bonds carry a coupon rate of 14
percent. Interest is paid semi-annually. The bonds will mature in seven years.
If the current market price is $1092.65, what is the yield to maturity on the
bond?
4. Bangor
Company’s common stock paid a dividend last year of $3.70. You believe that the
long-term growth in the dividends of the firm will be 8 percent per year. If
your required return for Bangor is 14 percent, how much are you willing to pay
for the stock?
