1. What is the price of a Verismo Company’s bond that has a 7.50 percent coupon and a face value of $1,000, pays interest semiannually, and has 15 years to maturity, if the required rate of return is 5 percent?
$1051.87.
$1,134.21.
$1,261.63.
$997.25.
$950.08.
2. Next year's earnings are estimated to be $3. The company plans to reinvest 25% of its earnings at 20%. If the cost of equity is 12%, what is the present value of growth opportunities?
$6.14
$8.14
$7.14
$12.12