FIN 3600 MOD 3 Homework
Summary
| Module 3 Homework Assignment |
| Chapter 4 Homework: P4-17a-c (pg. 146) |
| Chapter 5 Homework: P5-14 (pg. 176) |
| 16 available points → prorated to assignment grade 30 points |
| Problems can be solved algebraically, using Excel formulas, and/or using TVM financial calculator inputs. No credit will be given if work is not shown. |
| Note the number of decimal places required for many problems. Rounding too early can have a material effect on the answers. |
| Label your work with the appropriate $ or % as indicated. |
| Provide your work below the line for each problem tab. Highlight or bold your answers. |
P4-17
| P4-17 | 15 points | No credit will be given if work is not shown. Highlight or bold your answers. | |||||||||||
| You have gathered the following data on three bonds: | |||||||||||||
| a. If the market's required return on all three bonds is 6%, what are the market prices of the bonds (you can assume annual interest payments). (Show | |||||||||||||
| your work. Label $. Two decimal places required.) | |||||||||||||
| b. The market's required return suddenly rises to 7%. What are the new bonds prices, and what is the percentage change in price for each bond? (Show | |||||||||||||
| your work. Label $ and %. Two decimal places required for $ and one decimal place required for %.) | |||||||||||||
| c. If the market's required return falls from the initial 6% to 5%, what are the new prices, and what is the percentage change in each price relative to the | |||||||||||||
| answer obtained in part (a)? (Show your work. Label $ and %. Two decimal places required for $ and one decimal place required for %.) | |||||||||||||
P5-14
| P5-14 | 1 point | No credit will be given if work is not shown. Highlight or bold your answers. | |||||||||||
| One year from today, investors anticipate that Groningen Distillers Inc. stock will pay a dividend of $3.25 per share. After that, investors believe that the | |||||||||||||
| dividend will grow at 20% per year for three years before settling down to a long-run growth rate of 4%. The required rate of return on Groningen stock is | |||||||||||||
| 15%. What is the current stock price? (Show your work. Label $. Two decimal places required.) | |||||||||||||