Hightower pharmacy just paid a $3.10 annual dividend. the company has

Question 4

Hightower Pharmacy just paid a $3.10 annual dividend. The company has a policy of increasing the dividend by 4.2 percent annually. You would like to purchase 100 shares of stock in this firm but realize that you will not have the funds to do so for another four years. If you require a 16 percent rate of return, how much will you be willing to pay per share for the 100 shares when you can afford to make this investment?

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$31.50

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$32.27

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$33.12

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$33.78

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$34.47

 

Question 5

The common stock of Auto Deliveries sells for $28.16 a share. The stock is expected to pay $1.35 per share next year when the annual dividend is distributed. The firm has established a pattern of increasing its dividends by 3 percent annually and expects to continue doing so. What is the market rate of return on this stock?

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7.42 percent

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7.79 percent

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19.67 percent

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20.14 percent

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20.86 percent

 

Question 6

An 8 percent corporate bond that pays interest semi-annually was issued last year. Which two of the following most likely apply to this bond today if the current yield-to-maturity is 7 percent?I. a structure as an interest-only loanII. a current yield that equals the coupon rateIII. a yield-to-maturity equal to the coupon rateIV. a market price that differs from the face value

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I and III only

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I and IV only

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II and III only

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II and IV only

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III and IV only

 

Question 7

The bonds issued by Stainless Tubs bear an 8 percent coupon, payable semiannually. The bonds mature in 11 years and have a $1,000 face value. Currently, the bonds sell for $952. What is the yield to maturity?

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7.87 percent

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7.92 percent

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8.08 percent

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8.69 percent

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9.20 percent

Question 8

Combined Communications is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 15 percent a year for the next 4 years and then decreasing the growth rate to 3.5 percent per year. The company just paid its annual dividend in the amount of $0.20 per share. What is the current value of one share of this stock if the required rate of return is 15.5 percent?

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$1.82

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$2.04

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$2.49

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$2.71

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$3.05

 

Question 11

Miller Brothers Hardware paid an annual dividend of $0.95 per share last month. Today, the company announced that future dividends will be increasing by 2.6 percent annually. If you require a 13 percent rate of return, how much are you willing to pay to purchase one share of this stock today?

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$9.23

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$9.37

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$9.67

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$9.72

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$9.88

 

Question 12

Dexter Mills issued 20-year bonds a year ago at a coupon rate of 10.2 percent. The bonds make semiannual payments. The yield-to-maturity on these bonds is 9.2 percent. What is the current bond price?

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$985.55

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$991.90

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$1,042.16

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$1,089.02

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$1,098.00

 

Question 15

Redesigned Computers has 6.5 percent coupon bonds outstanding with a current market price of $832. The yield to maturity is 16.28 percent and the face value is $1,000. Interest is paid semiannually. How many years is it until these bonds mature?

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2.10 years

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4.19 years

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7.41 years

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9.16 years

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18.32 years

 

Question 16

Green Roof Inns is preparing a bond offering with a 6 percent, semiannual coupon and a face value of $1,000. The bonds will be repaid in 10 years and will be sold at par. Given this, which one of the following statements is correct?

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The bonds will become discount bonds if the market rate of interest declines.

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The bonds will pay 10 interest payments of $60 each.

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The bonds will sell at a premium if the market rate is 5.5 percent.

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The bonds will initially sell for $1,030 each.

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The final payment will be in the amount of $1,060.

 

Question 19

Oil Well Supply offers 7.5 percent coupon bonds with semiannual payments and a yield to maturity of 7.68 percent. The bonds mature in 6 years. What is the market price per bond if the face value is $1,000?

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$989.70

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$991.47

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$996.48

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$1,002.60

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$1,013.48

 

Question 20

Roy’s Welding Supplies common stock sells for $38 a share and pays an annual dividend that increases by 3 percent annually. The market rate of return on this stock is 8.20 percent. What is the amount of the last dividend paid?

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$1.80

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$1.86

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$1.92

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$1.98

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$2.10

 

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