# Expert Answers

What is the market value of the following bond?
Coupon 8% 8%
Maturity date 2038 22
Interest paid semiannually 44
Par Value \$1000 1000
Market interest rate 10% 10%
What is the market value of the following bond?
Coupon 9% 4.50%
Maturity date 2028 12
Interest paid semiannually 24
Par Value \$1000 1000
Market interest rate 8% 4%
What is the yield to maturity of the following bond?
Coupon 9% 9%
Maturity date   2027 11
Interest paid semiannually 22
Par Value \$1000 1000
Market price \$955.00 955
What is the current yield of bond in Question 3?
The risk free rate is 7%, the return in the market is 10%, and the beta is 1.30.  What return must you receive to be satisfied that you are being fairly compensated for the risk of the firm?
What should a zero coupon bond maturing for \$1000 in 9 years with a 7% market rate sell for?
Preferred stock has a dividend of \$12 per year.  The required return is 6%.  What should the price per share be?
Hurricane Corporation expects to grow its dividend by 5% per year.  The current dividend is \$2 per share.  The required return is 8%.
A.                What is the estimated value of a share of common stock?
B.                 If price is \$40 and dividends were \$1.50 per share but expected to grow at 4% per year, what would be the required rate of return?
Compute the expected return for the following investment
State of nature    Probability  Return
Boom  25% 20%
Average  60% 8%
Recession  15% 0%
The following are the expected returns on a portfolio of investments.    What is the expected rate of return on the portfolio?

Investment       # of Shares Price Per Share Expected return
A. 2000 \$20  10%
B. 3000 \$10  15%
C. 1000 \$15  8%
You take out a \$200,000 mortgage for 30 years at 6%.
What is your monthly payment? Solve Below
Fill out the ammortization table to answer the following questions.
What is the principle and interest on the 1st payment?
What is the principle and interest on the 12th payment?
How much interest will you pay over the 30 years?
NOTE:Completing the table will automatically transfer the final 3 questions to the answer page.
You bought a house 8 years ago with a \$250,000 mortgage.  It was a 15 year loan with monthly payments which will pay off the loan when you make the last payment. The interest rate was 6%.  What is your monthly payment?  Rate
Complete the ammortization table to answer the following questions.
You want to retire as a millionaire. How much do you need to put away each month if:
You use common stocks and have an average return of 10%?
You use corporate bonds and have an average return of 6%?
You use government bonds and have an average return of 4%?
You put your money in a CD at 3.5% interest rate?
You are offered a contract with a signing bonus. If they offered you either \$215,000 in cash or \$2,000 a month for 15 years, guaranteed, which do you take (based strictly on the math)? Your safe rate of return is 7.5%.
Computer the value of the \$2,000 a month here:
Which is greater?   The lump sum or the cash flow?
You are 30 years old and planning to retire at age 62.  You want to plan your finances for living 35 years past age 62 and then die dead broke. You determine that you will need \$3000 per month for the 35 years. At age 62, you plan to go live in the tropics on the beach and live on coconuts, rum and fishing. You need to conclude your retirement savings at age 55 because all your spare money then will go to your kids education.  Ignore inflation.
The question is how much money do you need to save each month between now and 55 so that you can quit contributing and have enough money for the \$3000 per month starting at age 62.   The expected return on your investments over the whole period is 10% per year.