1. What is a bond?

2. Does a zero-coupon bond pay interest? Explain your answer.

3. Endicott Enterprises Inc. has issued thirty-year semiannual coupon bonds with a face value of $1,000. If the annual coupon rate is 14% and the current yield to maturity is 8%, what is the firms current price per bond?

4. Delagold Corporation is issuing a zero-coupon bond that will have a maturity of fifty years. The bonds par value is $1,000, and the current yield to maturity on similar bonds is 7.5%. What is the expected price of this bond using a semi-annual interest?

5. Kwak Motors Inc. pays a $1.77 preferred dividend every quarter and will maintain this policy forever. What price should you pay for one share of preferred stock if you want an annual return of 9.25% on your investment?

6. Miles Hardware has an annual cash dividend policy that raises the dividend each year by 3%. Last years dividend was $1.00 per share. Investors want a 15% return on this stock. What is the stocks price?

7. Reco Corp. is expected to pay a dividend of $0.75 next year. The forecast for the stock price a year from now is $62.80. If the required rate of return is 7 percent, what is the current stock price?