ASSIGNMENT

#### How many pages is this assigment?

Session 7 Questions

Assignment Questions

#1- You are planning to buy 100 shares preferred stock, either Stock A or Stock B. Stock A pays an annual dividend of \$4.50 and has a market price of \$35. Stock B pays an annual dividend of \$4.25 and has a market price of \$36. If your required rate of return is 12%, which stock should you buy? HINT: Calculate the appropriate metric and decide.

I would choose stock A as it has a lower selling price of \$35.00, pays a higher dividend or \$4.50 and the required rate of return is this same.

#2- You intend to buy Marigo common stock at \$100 per share, hold it for one year, and sell it after receiving a cash dividend of \$6. How much will the stock price have to appreciate for you to achieve a required rate of return of 11%?

D1 = 6, P0=100 (50), Ks = 11% (15%)

SO we have P0 = D1/(Ks-g)

or g = Ks – D1/P0 = 11% – 6/100 = 5%

So P1 = D1*(1+g)/(Ks-g) = 6*(1+5%)/(11%-5%) = \$105.00

So Stock price should be \$105.00 for giving a 11% return.

#3- You are considering three investments.

• The first is a bond selling for \$1,100: it has \$1,000 par value, coupon rate of 13%, and 15-year maturity. For bonds in this risk class, it should offer 14% yield to maturity (rate of return).
• The second is a preferred stock with \$100 par value selling for \$90 per share, with a \$13 annual cash dividend – you require a 15% rate of return on this preferred stock.
• The third is a common stock with \$25 par value that pays a cash dividend of \$2; earnings per share for the company increased from \$3 to \$6 over 10 years, and the growth in dividends will be the same as the growth in earnings per share. The market price of the stock is \$20 per share, and you think a reasonable rate of return on it is 20%.

(You are NOT expected to do Excel calculations on this assignment. Therefore, the Excel results are shown below. Explain the inputs, output, and the interpretation of the output.)

Using the panel of Excel data on the next page and the Stocks Support Template 2015.xlsx that shows the formulas in the cells, answer these questions:

1. Explain how the value of each security is calculated, based on the stated required rate of return.
2. Which investment would you buy? Explain.
3. If your required rate of return changed to 12% for the bond, 14% for the preferred stock, and 18% for the common stock, how would your answers to parts a and b change? HINT:  Don’t do the calculations – explain how the change in required rate of return will change the results.
4. Repeat part c with required rates of return of 20% on the common stock, with anticipated constant growth rate changes to 12%.

#4- Which is better, a \$40 stock or a \$4 stock? Explain very briefly.

#5- Show the equation/formula you would use to calculate the average annual rate of return on a stock you bought on January 27, 2002 for \$100 and sold on January 27, 2012 for \$150? Assume that dividend payout was zero.

#6- Construct a table to succinctly compare and contrast the building blocks of stock and bond valuation.

Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

# Our Guarantees

At 111papers.com, we value all our customers, and for that, always strive to ensure that we deliver the best top-quality content that we can. All the processes, from writing, formatting, editing, and submission is 100% original and detail-oriented. With us, you are, therefore, always guaranteed quality work by certified and experienced writing professionals. We take pride in the university homework help services that we provide our customers.

### Money-Back Guarantee

As the best homework help service in the world, 111 Papers ensures that all customers are completely satisfied with the finished product before disbursing payment. You are not obligated to pay for the final product if you aren’t 100% satisfied with the paper. We also provide a money-back guarantee if you don’t feel that your paper was written to your satisfaction. This guarantee is totally transparent and follows all the terms and conditions set by the company.

### Zero-Plagiarism Guarantee

All products that we deliver are guaranteed to be 100% original. We check for unoriginality on all orders delivered by our writers using the most advanced anti-plagiarism programs in the market. We, therefore, guarantee that all products that we submit to you are 100% original. We have a zero-tolerance policy for copied content. Thanks to our strict no plagiarized work rule, you can submit your homework to your professor without worrying.

### Free-Revision Policy

TThis is one of the most cherished courtesy services that we provide to help ensure that our customers are completely satisfied with our finished products. Delivering the best final product to our customers takes multiple inputs. 111papers.com prides itself on delivering the best university homework help services in the writing industry. And, in part, our free revision policy is how we do it. What’s more, all our revisions are 100% free without any strings attached.

Client privacy is important to use. We know and understand just how important customers value their privacy and always want to safeguard their personal information. Thus, all the information that you share with us will always remain in safe custody. We will never disclose your personal information to any third party or sell your details to anyone. 111 Papers uses the most sophisticated, top-of-the-line security programs to ensure that our customers’ information is safe and secured.

### Fair-Cooperation Guarantee

Placing your order with us means that you agree with the homework help service we provide. We, in turn, will endear to ensure that we do everything we can to deliver the most comprehensive finished product as per your requirements. We will also count on your cooperation to help us deliver on this mandate. Yes, we also need you to ensure that you have the highest-quality paper.

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors: