Finance Questions1

A1.

(Bond valuation) A $1,000 face   value bond has a remaining maturity of 10 years and a required return of 9%.   The bond’s coupon rate is 7.4%. What is the fair value of this bond?

A10.

(Dividend discount model) Assume   RHM is expected to pay a total cash dividend of $5.60 next year and its   dividends are expected to grow at a rate of 6% per year forever. Assuming   annual dividend payments, what is the current market value of a share of RHM   stock if the required return on RHM common stock is 10%?

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A12.

(Required return for a preferred   stock) James River $3.38 preferred is selling for $45.25. The preferred   dividend is nongrowing. What is the required return on James    River preferred stock?

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A14.

(Stock valuation) Suppose Toyota has nonmaturing   (perpetual) preferred stock outstanding that pays a $1.00 quarterly dividend   and has a required return of 12% APR (3% per quarter). What is the stock   worth?