finanacial management v

Project Description:

1. 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?

2. valuation - preferred stock

what is the value of a share of preferred stock that pays a $4.50 dividend, assume k is 10%.

3. valuation – options

the following information refers to a six-month call option on the stock of xyz, inc.

price of the underlying stock: $50
strike price of the three-month call: $45
market price of the option: $10


a) what is the intrinsic value of the option?

b) what is the option’s time premium at this price?

4. valuation - preferred stock

what is the value of a share of preferred stock that pays a $9.50 dividend, assume k is 12%.

5. valuation - constant growth - common stock.

what is the value of a share of common stock that paid $1.60 last year, the growth rate is 7%, assume the risk free rate is 4%, the market return is 9% and the beta is 1.4.

6. go to www.cnbc.com and explore the video tab by using several different key terms such as stock pricing, stock valuation, bond prices, etc. watch at least two videos you find. list the videos you viewed, and provide a summary of the type of information that the video contained and how it relates to the models, variables and the process of valuation.
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Price Type: Negotiable

Completed
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