$1.$ If a G$.$O Muni Bond with a coupon rate of $5\mathrm{.}2\%$ and YTM of $4\mathrm{.}6\%$ has a maturity date of $4/5/35,$

what would its price be $($assuming semiannual coupons$)?(3$ points$)$

a$.$ Why is the price a premium or discount to par? Briefly explain. $(3$ points$)$

b$.$ What is unique, in terms of how this bond is secured$/$collateralized and taxability of

coupons, about this particular bond...relative to a $$Revenue Bond$?(4$ points$)$

$2.$ Understanding how a yield curve is commonly used to forecast the expected change in direction of

interest rates, briefly explain how you might interpret the risk premiums $(3$ discussed in class$)$ that

are inherent in a steep curve? $(7$ points$)$

$3.$ If a Ford Motor $16-$year corporate debenture was trading a price of $$1048,$ what would its YTM be if

it has a $5\mathrm{.}6\%$ coupon rate $($semiannual payment$)?(3$ points$)$

Assuming this bond has a Ba credit rating $($S&P$),$ how might Ford improve its balance sheet $($capital

structure$)$ to potentially reduce its cost of capital? Please explain. $(5$ points$)$

$4.$ Calculate today$$s stock price for CLF if last period$$s dividend was $$1\mathrm{.}32$ and its dividend growth

forever is expected to be $4\mathrm{.}8\%$ and a required rate of return of $9\mathrm{.}6\%?(3$ Points$)$

$5.$ Using the above assumptions $($Q$4),$ how would you partition CLF$$s required rate of return...in terms

of its dividend yield and capital gains growth rate? Please show the computation. $(3$ Points$)$

$6.$ If CLF$$s dividend was expected to grow at $21\%$ for the next $3$ years, and then return to a constant

growth rate of $4\mathrm{.}8\%$ thereafter $($post year $3),$ what would you model its stock price to be $($again$,$

assuming a required rate of return of $9\mathrm{.}6\%$ and D$0$ of $$1\mathrm{.}32).(10$ Points$)$

$7.$ Period Performance

$2020-11\%$

$202115\%$

$20224\%$

$202312\%$

Q$7$ Questions:

What is the arithmetic average return over the past $4$ years? $(2$ Points$)$

What is the standard deviation of this sample of returns? $(4$ Points$)$

What distribution of returns would you expect $95\%$ of the time? $(3$ Points$)$