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. If an American Water Company bond has a coupon rate of 9% and is selling for $890, then the… 1 answer below

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1). If an American Water Company bond has a coupon rate of 9% and is selling for $890, then the… 1 answer below » 1). If an American Water Company bond has a coupon rate of 9% and is selling for $890, then the yield to maturity (market interest rate) must be ____. a) greater than 9% b) equal to 9% c) less than 9% d) cannot be determined 2) In order for a company to benefit from calling an issue of bonds, the interest savings must offset the ____. a) call premium to redeem the outstanding bonds b) issuance costs related to the new bonds (underwriters fees) c) transaction costs/professional fees related to the new bonds d) all the above 3) What is the value of an Orion bond that has a 10% coupon, pays View complete question » 1). If an American Water Company bond has a coupon rate of 9% and is selling for $890, then the yield to maturity (market interest rate) must be ____. a) greater than 9% b) equal to 9% c) less than 9% d) cannot be determined 2) In order for a company to benefit from calling an issue of bonds, the interest savings must offset the ____. a) call premium to redeem the outstanding bonds b) issuance costs related to the new bonds (underwriters fees) c) transaction costs/professional fees related to the new bonds d) all the above 3) What is the value of an Orion bond that has a 10% coupon, pays interest annually, and has 10 years to maturity, if the required rate of return is 12%? a) $1,106.42 b) $906.38 c) $1,000.00 d) $887.00 4) Heleveton, Inc. currently pays a common stock dividend of $2.00 per share (D0). Dividends are expected to increase by $0.50 per share next year. Determine the current value of Heleveton’s common stock to an investor who expects to be able to sell the stock for $32 after one year. Assume that the investor requires a 12% rate of return on the security. _x000C_a) $30.36 b) $30.80 c) $20.83 d) $33.05 5) The current price of Zebar is $32.00 and the current dividend is $.60 (D0). What is an investor’s required rate of return on Zebar if dividends are expected to grow perpetually at a compound annual rate of 8%? a) 9.88% b) 10.03% c) 18.75% d) 11.38% Document Preview: 1).
If an American Water Company bond has a coupon rate of 9% and is selling for $890, then the yield to maturity (market interest rate) must be ____.

a) greater than 9%
b) equal to 9%
c) less than 9%
d) cannot be determined
2) In order for a company to benefit from calling an issue of bonds, the interest savings must offset the ____.
a) call premium to redeem the outstanding bonds
b) issuance costs related to the new bonds (underwriter’s fees)
c) transaction costs/professional fees related to the new bonds
d) all the above
3) What is the value of an Orion bond that has a 10% coupon, pays interest annually, and has 10 years to maturity, if the required rate of return is 12%?
a) $1,106.42
b) $906.38
c) $1,000.00
d) $887.00
4) Heleveton, Inc. currently pays a common stock dividend of $2.00 per share (D0). Dividends are expected to increase by $0.50 per share next year. Determine the current value of Heleveton’s common stock to an investor who expects to be able to sell the stock for $32 after one year. Assume that the investor requires a 12% rate of return on the security.
a) $30.36
b) $30.80
c) $20.83
d) $33.05
5) The current price of Zebar is $32.00 and the current dividend is $.60 (D0). What is an investor’s required rate of return on Zebar if dividends are expected to grow perpetually at a compound annual rate of 8%?
a) 9.88%
b) 10.03%
c) 18.75%
d) 11.38% Attachments: Q-Attachment…..docx View less » Aug 04 2015 09:53 AM



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