Finance Question - Finance Math Problems

2.Valuation – convertible bond You purchased one of AAA Corp.’s 9%, 15-year convertible bonds at its $1,000 par value a year ago when the company’s common stock was selling for $25. Similar bonds without a conversion feature returned 10% at the time. The bond is convertible into stock at a price of $35. The stock is now selling for $40. Assume no dividends. a) You exercise the conversion feature today and immediately sold the stock you received. Calculate the total return on your investment. b) What would your return have been if you had invested $1,000 in AAA’s stock instead of the bond?

3.Valuation – zero-coupon bond A U.S. Government bond with a face amount of $10,000 with 13 years to maturity is yielding 5.5%. What is the current selling price?

4.Valuation - preferred stock What is the value of a share of preferred stock that pays a $4.50 dividend, assume k is 10%.

5.Valuation - Constant growth - common stock. What is the value of a share of common stock that paid $2.00 last year, the growth rate is 8%, assume the risk free rate is 4%, the market return is 10% and the Beta is 1.5.

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