Problem 7-40, Stormy Weather
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
Complete the table of growth rates, stock prices, and P/E ratios.
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Complete the table of growth rates, stock prices, and P/E ratios.
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At what price must Trend-Line’s stock be selling at? What part is due to assets in place and what part is due to growth opportunities?
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Determine the current price and future prices at various time points for two bonds with differing characteristics, given their coupon rates, YTMs, and time to maturity. Explain the observed pattern and graph bond prices against time to maturity.
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Calculate the percentage change in the price of two bonds with the same coupon rate, payment frequency, and par value but different maturities, given a sudden increase or decrease in interest rates. Illustrate the results by graphing bond prices against YTM and discuss the interest rate risk of longer-term bonds.
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Calculate the percentage price change of two bonds with different coupon rates but the same time to maturity, payment frequency, and YTM, given a sudden increase or decrease in interest rates. Discuss the interest rate risk of lower-coupon bonds.
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Calculate the current yield, YTM, and effective annual yield for a company’s bonds, given the coupon rate, time to maturity, payment frequency, and current selling price as a percentage of par.
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Determine the coupon rate a company should set on its new bonds to sell at par, given the current bonds’ coupon rate, selling price, payment frequency, par value, and time to maturity.
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Determine the remaining years to maturity for bonds with a given coupon rate, yield to maturity (YTM), and current yield.
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Determine the yield to maturity and current yield of a bond based on its bond quotes, face value, and current date.
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Determine the issuance price, interest deductions using the IRS amortization rule and straight-line method for a zero-coupon bond issued by a corporation to finance its plant expansion, given the par value, required return, and compounding periods.
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