Question 1 Valuation – zero-coupon bond A U.S. Government bond with a face amount of $10,000 with 8 years to maturity is yielding 3.5%. What is the current selling price?

Question 2 Valuation – preferred stock What is the value of a share of preferred stock that pays a $9.50 dividend, assume k is 12%.

Question 3 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?

Question 4 A $1000 par value convertible bond has a conversion price of $50. It is currently selling for $1,120 despite the fact that the bond’s coupon rate and the market rate are equal. The common stock obtained upon conversion is selling for $54 per share. What is the convertible bond’s conversion premium?

Question 5 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?

Question 6 Present value of single sum problem You are going to be given $100,000 in 12 years. Assuming an interest rate of 3.5%, what is the present value of this amount?

Question 7 Future value of single sum problem You put $2,000 in an investment account today which will earn 8% over the next 14 years, what is the future value?

Question 8 Present value of single sum problem You are going to be given $45,000 in 7 years. Assuming an interest rate of 2.5%, what is the present value of this amount?

Question 9 Future value of single sum problem You put $5,000 in an investment account today which will earn 6% over the next 11 years, what is the future value?

Question 10 Present value of annuity problem You will receive $1,200 at the end of the next 15 years, assuming a 8% discount rate, what is the present value of the cash flows?