# Corp Finance

Topics: Stock, Bond, Time value of money Pages: 2 (658 words) Published: May 29, 2012
TIME VALUE OF MONEY
1. You invested \$1,000 at 4% compounded annually. How much interest was earned in year 5?

2. Gianni invested \$10,000 at a rate of 6% compounded annually. How long will it take for the investment to grow to \$40,000 3. What is the present value of an income stream which has a negative flow of \$100 per year for each of the next 3 years, and a positive flow of \$300 per year in years 4 through 7, if the appropriate discount rate is 10%?

BONDS

1. The current market price of McGill Corporation's 10 percent, 10 year bonds is \$1,297.58. A 10 percent coupon interest rate is paid semiannually, and the par value is equal to \$1,000. What is the YTM (stated on a nominal, or annual, basis) if the bonds mature 10 years from today?

2. A 6-year bond that pays 8 percent interest semiannually sells at par. Another 6-year bond of equal risk pays 8 percent interest annually. Both bonds are not callable. What is the price of the bond that play annual interest?

STOCKS

1. A company has just paid a dividend of \$1.40 per share. Dividends are expected to grow at a rate of 5% per year for the foreseeable future. If the required return is 10%, what is the value of one share of the company’s stock.

2. Superior Enterprises has just paid a dividend of \$1.05 and will pay \$1.10 next year. Dividends are expected to grow at a constant rate indefinitely. What is the required rate of return if the stock is selling for \$30 today?

3. Junkies Corporation has just paid a dividend of \$0.90. Dividends are expected to grow at 20% for years one and two, 15% for years three and four, 10% for years five and six, and 5% thereafter. What is the expected dividend for year 10 if the required return is 18 percent?

4. The stock of SuperGrowth, Inc. just paid a dividend of \$0.78. What is the expected capital gains yield if the stock is selling for \$28.25 today and the required rate of return is 15 percent?

5. You purchase 500...