Question

6)

Suppose a 5​-year, $1,000 bond with annual coupons has a price of $960 and a yield to maturity of 6%.

What is the​ bond's coupon​ rate? The coupon rate is ----------​%. (Round to two decimal​ places.)

7)

Suppose a 5​-year, $1,000 bond with annual coupons has a price of $960 and a yield to maturity of 6%.

What is the​ bond's coupon​ rate? The coupon rate is ----------​%. (Round to two decimal​ places.)

12)

Colgate-Palmolive Company has just paid an annual dividend of $1.12. Analysts are predicting dividends to grow by $0.14 per year over the next five years. After​ then, Colgate's earnings are expected to grow 6.4% per​ year, and its dividend payout rate will remain constant. If​ Colgate's equity cost of capital is 9.4% per​ year, what price does the​ dividend-discount model predict Colgate stock should sell for​ today?

The price per share is $ ---------. (Round to two decimal​ places.)

Answer 1

Pb 6)

Value of bond = PV of cashflows arising fro it.

Let "X" be the coupon amount

Thus $ 960 = $ 747.26 + 4.2124X

4.2124X = $ 960 - $ 747.26

= $ 212.74

X = 212.74 / 4.2124

= $ 50.50

Coupon rate = Coupon Amount / Face Value

= $ 50.50 / $ 1000

= 0.0505 i.e 5.05%

pb 7 = all details are same as Pb 6

Pb 12)

Compuattion of Div:

P0 = PV of Cash flows arising from it.

P5 = D6 / ( Ke - g)

= $ 1.9365 / ( 9.4% - 6.4%)

= $ 1.9365 / 3%

= $ 64.55

P0: