Assignment

· * From the e-Activity, determine whether stock prices are affected more by long-term or short-term performance. Provide one (1) example of the effect that supports your claim.

E-ACTIVITY Use the Internet to research instances where a company’s stock prices are affected more by long-term or short-term performance. Be prepared to discuss.

· Value a share of TFC’s(fitness center) stock using a growth model method and compare that value to the current trading price of a share of TFC. Determine whether the stock is undervalued or overvalued. Provide a rationale for your response.

HOMEWORK

Assume that you are nearing graduation and have applied for a job with a local bank. The bank’s

evaluation process requires you to take an examination that covers several financial analysis techniques.

Use the following information for Questions 1 through 2:

1. What is the present value of the following uneven cash flow stream −$50, $100, $75, and $50 at the

end of Years 0 through 3? The appropriate interest rate is 10%, compounded annually.

2. Suppose that on January 1 you deposit $100 in an account that pays a nominal (or quoted) interest

rate of 11.33463%, with interest added (compounded) daily. How much will you have in your account

on October 1, or 9 months later?

Use the following information for Questions 3 and 4:

A firm issues a 10-year, $1,000 par value bond with a 10% annual coupon and a required rate of return is

10%.

3. What is the yield to maturity on a 10-year, 9% annual coupon, $1,000 par value bond that sells for

$887.00? That sells for $1,134.20? What does a bond selling at a discount or at a premium tell you

about the relationship between rd and the bond’s coupon rate?

4. What are the total return, the current yield, and the capital gains yield for the discount bond in

Question #3 at $887.00? At $1,134.20? (Assume the bond is held to maturity and the company does not default on the bond.)

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