1. Calculate the yield to maturity on a 6% semiannual bond that matures in 5 years, if the bond sells for $96. Convert your answer into the continuously compounded yield.
2. ABC Corp. has a stock price P0 = 50. The firm has just paid a dividend of $3 per share, and intelligent shareholders think that this dividend will grow by a rate of 5% per year. Use the Gordon dividend model to calculate the expected return of ABC.
3. If you paid $49 for a share of preferred stock that pays a $3.63 dividend what would be your return?