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FIN 571 Week 4 Connect Problems â€“ Assignment

1. Microhard has issued a bond with the following characteristics:

Par: $1,000

Time to maturity: 11 years

Coupon rate: 9 percent

Semiannual payments

Calculate the price of this bond if the YTM is (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.):

Price of the Bond

a. 9 percent $ _____

b. 11 percent $ _____

c. 7 percent $ _____

2. Watters Umbrella Corp. issued 20-year bonds 2 years ago at a coupon rate of 8.4 percent. The bonds make semiannual payments. If these bonds currently sell for 90 percent of par value, what is the YTM? (Do not round intermediate calculations ...view middle of the document...

g., 32.16.)

Stock price $ _____

c. What will the price be in 7 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Stock price $ _____

Find the week 4 connect problems answers here FIN 571 Week 4 Connect Problems

6. The next dividend payment by ECY, Inc., will be $1.64 per share. The dividends are anticipated to maintain a growth rate of 8 percent, forever. The stock currently sells for $31 per share.

a. What is the dividend yield? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Dividend yield _____%

b. What is the expected capital gains yield? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Capital gains yield ______ %

7. Zoom stock has a beta of 1.46. The risk-free rate of return is 3.07 percent and the market rate of return is 11.81 percent. What is the amount of the risk premium on Zoom stock?

â€¢ 8.09%

â€¢ 12.76%

â€¢ 9.59%

â€¢ 10.25%

â€¢ 17.24%

8. The risk premium for an individual security is computed by:

â€¢ multiplying the security's beta by the market risk premium.

â€¢ multiplying the security's beta by the risk-free rate of return.

â€¢ adding the risk-free rate to the security's expected return.

â€¢ dividing the market risk premium by the quantity (1 + Beta).

â€¢ dividing the market risk premium by the beta of the security.

9. The risk-free rate of return is 3.68 percent and the market risk premium is 7.84 percent. What is the expected rate of return on a stock with a beta of 1.32?

â€¢ 9.17%

â€¢ 9.24%

â€¢ 13.12%

â€¢ 14.03%

â€¢ 14.36%

10. Mullineaux Corporation has a target capital structure of 80 percent common stock and 20 percent debt. Its cost of equity is 17 percent, and the cost of debt is 11 percent. The relevant tax rate is 35 percent.

What is the companyâ€™s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

WACC _____ %

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11. Miller Manufacturing has a target debtâ€“equity ratio of .65. Its cost of equity is 13 percent, and its cost of debt is 9 percent. If the tax rate is 40 percent, what is the companyâ€™s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

WACC _____ %

12. Filer Manufacturing has 7 million shares of...

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