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(Solved) 1) Ford has a 10 year, 6.95% coupon bond that is currently selling for 978.65. Assume that coupon payments are annual. What is the interest rate of


Please Answer Questions 1 to 6 (show work for all questions)

1) Ford has a 10 year, 6.95% coupon bond that is currently selling for 978.65. Assume that coupon
payments are annual. What is the interest rate of this bond? (USE excel) 2) Assume that Disney Corp has a 30 year, 5.5% coupon bond. Given Ford’s recent troubles, your
broker indicates that the interest rate of this bond should be 7.25%. Assume that coupon
payments are annual. What should be the price of this bond?
3) Assume that Netflix has a 15 year, 7.5% coupon bond and that its reported yield-to-maturity is
7.4%. Assume that coupon payments are semiannual (remember that if payments occur on a
semiannual basis then the reported yield to maturity will actually be twice the semiannual
yield). What is the price of this bond?
4) Intel Inc. does not currently pay dividends; however, investors expect that in four years, the firm
will pay its first dividend of $2.50 per share. From that point onwards, the dividend is expected
be $3 annually forever. Assume that investors required rate of return is 8%. What should the
price of Hayworth Industries be today?
5) Today, IBM paid a dividend of $1.50 per share. Investors think that IBM’s dividend will grow at
5% for the next four years. After that, the dividend will be constant at $3. What should be the
price per share of IBM if the discount rate is 8%? 6) You are buying a $1m house with 20% down payment, 30-year mortgage, monthly payment.
Interest payment on your financing is 4%.
a. What is your monthly payment?
b. How much of the principal is paid in the first month? How much of it is paid in the
second month?

 


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