B$.$ Use the basic stock valuation formula, the Dividend Growth Model, or the CAPM formula to calculate the value for the stock in each scenario below. When there is a change, assume everything else remains the same in that question. Write the three formulas here:

Basic Stock Valuation formula:

Dividend Growth Model formula:

Capital Asset Pricing Model formula:

If a share of preferred stock pays a dividend of $$1$ and your required rate of return is $10\%,$ what is the stock worth? $$

You have an opportunity to purchase an infinite flow of payments of $$100$ per year and your required rate of return is $8\%.$ How much would you pay for this investment? $$

XLM stock pays a $$5\mathrm{.}60$ annual dividend and does not have plans to ever change that amount. You have a required rate of return of $9\%.$ How much would you pay for that stock?

Use the DIVIDEND GROWTH MODEL FORMULA

$4.$ Today's dividend $D_0=$$$2$;$k=10\%$;$g=6\%$

$5.$ Assume the dividend is increased to $$3.$

$6.$ What if the required return declines to $7\mathrm{.}5\%.$

$7.$ Assume the growth declines to $4\%.$

$8.$ Assume the dividend increases to $$2\mathrm{.}30,$ the growth declines to $4\%,$ and the required return remains at $10\%.$

$9.$ ABC $\text{'}$s last dividend was $$1\mathrm{.}75$ and you expect a growth rate of $6\%$ with a required rate of return of $9\%$ for this company. How much would you be willing to pay for this stock?

USE THE CAPITAL ASSET PRICING MODEL formula for these questions:

$10.$ Assume a risk$-$free rate of $3\mathrm{.}5\%,$ a market return of $9\mathrm{.}5\%.$ If a stock has a beta of $\mathrm{.}9,$ what is the stock worth?

$$

$11.$ Assume the following: market return: $8\mathrm{.}8\%$; risk free return $3\%$; beta $\mathrm{.}5$ :

a$.$ What is the market risk premium?

b$.$ What is the risk adjusted required rate of return on this stock?

$12.$ If the required return is $8\mathrm{.}3$ percent and the beta is $\mathrm{.}8,$ and the market risk premium is $6\%,$ what is the risk$-$free rate?C$.$ Bond Valuation Practice Set. Assume annual coupon payments in answering the following questions.

What is a bond? Please be specific and provide an example of a current bond being floated.

Explain the difference between current yield, yield to maturity, and coupon rate.

Assume a bond has a coupon of $6\%$ and matures in $10$ years. If the market rate on similar bonds is $8\%,$ what is the price of this bond? $$

What would the price of the above bond be if it matures in $5$ years? $q,$

$$

Why did the price rise when the number of years was reduced?

What is the current yield on each of these bonds?

Assume a bond has a $7\mathrm{.}5$ percent coupon and matures in $10$ years. If the market rate is $10$ percent, what is the bond's price? $$

Assume you have had the bond in #$5$ for six years and interest rates are still $10$ percent. What price could you get if you wanted to sell the bond?

Assume a bond with $15$ years to maturity has a $4$ percent coupon. If the bond sells for par value, what is the yield to maturity?

How much would you pay for a $30-$year $100,000$ zero coupon bond if your required rate of return is $8\%?$

$$

What is the price of a bond with a $6$ percent coupon that matures in $12$ years if the market rate on similar bonds Is $9\%?$

What is the price on the bond in the above question $($#$11)$ if the market rate is $5\%?$