1. You’re looking at two bonds identical in every way except for their coupons and, of course, their prices. Both have 12 years to maturity. The first bond has a 5 percent coupon rate and sells for $932.16. The second has a 6 percent coupon rate. What do you think it would sell for?

2.What is the indenture? What are protective covenants? Give some examples.

3.What is the term structure of interest rates? What determines its shape?

4.A corporation issue a bond with face value of $1,000 at the time the market rate of interest was 12%. At what price did the bond sell initially?

 5.The current price of the share P0 is $20 and last year’s price (P-1) was $18.87. This year the dividend D0 is $2. Assume a constant growth rate (g) in dividend share price. What is the rate of return for the coming year?

6.Why do some companies have two classes of stock?

7. steady rate of 8 percent per year. Based on this information, what would the dividend be in five years?

8. A company dividend’s this year is $2.25 per share, and dividends are expected to grow at 12% for the next four years and at 5% indefinitely after that. If the firm discount rate is 8%, what is the value of one share today?

9. What would you pay for a share of ABC Corporation stock today if the next dividend will be $2 per share, your required return on equity investments is 12%, and the stock is expected to be worth $110 one year from now? 

A. $95     B. $120   C.)$115    D.$110   E. $100

10. Llano’s stock is currently selling for $50.00. The expected dividend one year from now is $1.50 and the required return is 10%. What is this firm’s dividend growth rate assuming the constant dividend growth model is appropriate?

A. 7%    B. 8%    C. 9%   D. 10%     E. 11%

11. ABC Corporation’s common stock dividend yield is 2.1%, it just paid a dividend of $1, and is expected to pay a dividend of $1.07 one year from now. Dividends are expected to grow at a constant rate indefinitely. What is the required rate of return on ABC stock?

A. 9.0%     B.10.6%      C.9.3%    D.9.1%      E. 11.2%

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