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Chapter 10 - Valuation and Rates of Return
69. The longer the time to maturity:
70. What is the approximate yield to maturity for a five-year bond that pays 4% interest on a
$1000 face value annually if the bond sells for $952?
71. A higher interest rate (discount rate) would
Chapter 10 - Valuation and Rates of Return
72. A bond pays 7% yearly interest in semi-annual payments for 10 years. The current yield
on similar bonds is 9%. To determine the market value of this bond, you must
73. A 15-year bond pays 9% on a face value of $1,000. If similar bonds are currently yielding
6%, what is the market value of the bond? Use annual analysis.
Chapter 10 - Valuation and Rates of Return
74. A 10-year bond pays 5% on a face value of $1,000. If similar bonds are currently yielding
10%, what is the market value of the bond? Use annual analysis.
75. An issue of preferred stock is paying an annual dividend of $1.50. The growth rate for the
firm's common stock is 5%. What is the preferred stock price if the required rate of return is
7%?
Chapter 10 - Valuation and Rates of Return
76. Which is a characteristic of the price of preferred stock?
77. Preferred stock has all but which of the following characteristics?
78. The price of preferred stock may react strongly to a change in kpbecause
Chapter 10 - Valuation and Rates of Return
79. The growth rate for the firm's common stock is 7%. The firm's preferred stock is paying
an annual dividend of $3. What is the preferred stock price if the required rate of return is
8%?
80. Will an increase in inflation have a larger impact on the price of a bond or preferred
stock?
81. The value of a common stock is based on its
Chapter 10 - Valuation and Rates of Return
82. The dividend valuation model stresses the
83. A common stock which pays a constant dividend can be valued as if it were
84. The dividend on preferred stock is most similar to:
Chapter 10 - Valuation and Rates of Return
85. An issue of common stock's most recent dividend is $1.75. Its growth rate is 5.7%. What
is its price if the market's rate of return is 7.7%?
86. An issue of common stock is selling for $57.20. The year end dividend is expected to be
$2.32 assuming a constant growth rate of 4%. What is the required rate of return?
Chapter 10 - Valuation and Rates of Return
87. An issue of common stock is expected to pay a dividend of $5.15 at the end of the year. Its
growth rate is equal to 6%. If the required rate of return is 10%, what is its current price?
88. If expected dividends grow at 7% and the appropriate discount rate is 9%, what is the
value of a stock with an expected dividend of $1.00?
89. Stock valuation models are dependent upon
Chapter 10 - Valuation and Rates of Return
90. If a company's stock price (Po) goes up, and nothing else changes, Ke (the required rate of
return) should
91. An issue of common stock has just paid a dividend of $2.00. Its growth rate is equal to
4%. If the required rate of return is 7%, what is its current price?
Chapter 10 - Valuation and Rates of Return
92. An issue of common stock is expected to pay a dividend of $3 at the end of the year. Its
growth rate is equal to 3%, and the current share price is $40. What is the required rate of
return on the stock?
93. The cost of capital for common stock is ke= (D1/Po) + g. What are the assumptions of the
model?
94. Required return by investors is directly influenced by all of the following except:
Chapter 10 - Valuation and Rates of Return
95. All of the following would likely cause a firm to raise capital at a lower cost except:
96. The required return by investors is important to financial managers for all of the following
reasons except:
97. The market allocates capital to firms based on all of the following except:
