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Integrated Potato Chips paid a $1.70 per share

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Question

Integrated Potato Chips paid a $1.70 per share dividend yesterday. You expect the dividend to grow

steadily at a rate of 5% per year.

a.What is the expected dividend in each of the next 3 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
 Expected Dividend
  Year 1$      
  Year 2    
  Year 3    
b.If the discount rate for the stock is 11%, at what price will the stock sell today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
  Current price$  
c.What is the expected stock price 3 years from now? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
  Future price$  
d.If you buy the stock and plan to hold it for 3 years, what payments will you receive? What is the present value of those payments? (Leave no cells blank – be certain to enter “0” wherever required. Do not round intermediate calculations. Round your answers to 2 decimal places.)
d.If you buy the stock and plan to hold it for 3 years, what payments will you receive? What is the present value of those payments? (Leave no cells blank – be certain to enter “0” wherever required. Do not round intermediate calculations. Round your answers to 2 decimal places.)
     Year 1     Year 2     Year 3 
  Dividend$    $    $    
  Sale of stock         
    
  Total cash flow$    $    $    
    
  PV of cash flow$    $    $   
 
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Steady As She Goes Inc.

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Question

Steady As She Goes Inc. will pay a year-end dividend of $3.60 per share. Investors expect the dividend to grow at

a rate of 4% indefinitely.

a.If the stock currently sells for $36 per share, what is the expected rate of return on the stock? (Do not round intermediate calculations. Enter your answer as a whole percent.)
  Expected rate of return%  
b.If the expected rate of return on the stock is 16.5%, what is the stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
  Stock price$  
 
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annual dividend

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Question

Preferred Products has issued preferred stock with an annual dividend of $6.50 that will be paid in

perpetuity.

a.If the discount rate is 10%, at what price should the preferred sell?
  Current price$  
b.At what price should the stock sell 1 year from now?
  Future price$  
c.What is the dividend yield, the capital gains yield, and the expected rate of return of the stock? (Leave no cells blank – be certain to enter “0” wherever required. Enter your answers as a whole percent.)
   
  Dividend yield%  
  Capital gains yield%  
  Expected rate of return %  
 
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Consider three bonds with 6.0% coupon rates

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Question

Consider three bonds with 6.0% coupon rates, all making annual coupon payments and all selling at a face value of

$1,000. The short-term bond has a maturity of 4 years, the intermediate-term bond has maturity 8 years, and the long-term bond has maturity 30 years.

a.What will be the price of each bond if their yields increase to 7.0%? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
             4 Years           8 Years          30 Years
  Bond price$   $   $   
b.What will be the price of each bond if their yields decrease to 5.0%? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
          4 Years          8 Years          30 Years
  Bond price$   $   $   
c.Are long-term bonds more or less affected than short-term bonds by a rise in interest rates?
  
 More affectedLess affected
d.Would you expect long-term bonds to be more or less affected by a fall in interest rates?
  
 More affectedLess affected
 
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