Valuation Problems: Stocks, Bonds, and Other Investments

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Valuation Problems: Stocks, Bonds, and Other Investments

1. What are the values of the three investments:

a. Stock in which you expect a dividend of $300 a year indefinitely. You feel you

should obtain a 10% return based on the risk you are taking /) '<I-

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ou decide to b ,M bonds that are selling in the open market for $950. Thecoupon rate s 8 percent. he bonds mature in 10 years. What is the Yield-to-Maturity ofthes nas? ( 0 'b>c{(.)~ Y>o 0-\

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Valuation Problems: Stocks, Bonds, and Other Investments

1. What are the values of the three investments:

a. Stock in which you expect a dividend of $300 a year indefinitely. You feel you

should obtain a 10% return based on the risk you are taking /) 1-

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c. A parking lot that generated $40,000 in cash flow last year (time period 0). The cashflows are expected to grow at 4% per year. The required return is 11 percent.

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bond with a $1,000 par value. The market ra for a bond like this (risk level ofcompany and maturity rate) is 11 percent. The ompany is selling 100,000 of thesebonds. How much should these bonds sell for i the marketplace? Excludingtransaction costs, how much will Cemex collect? PP1.,/--;;IC>J

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volbvkt/ou decide to b ,]vIbonds that are selling in the open market for $950. The

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