Please answer all exercises, 1, 3, 6, 7, 9 & 8 clearly and completely.

1. The following table contains information on three debentures issued by Altos Hornos with a face value of 8,000. Today is January 1, 2002. years to Coupon Maturity maturity 5% 2007 5 8% 201 7 1 5 12 5'8 2027 25 a) Why does the coupon vary so widely? in) What is the value of each bond if kd = 8%? c) What would the value be if the coupons were semi-annual instead of annual? (Solve for the ve- year bond only). d) What is the nominal rate and the effective rate of return on the fteen-year bond? 9) {What is the expected price of the five-year bond one year from now (January 1, 2003) and its return on equity if the required yield is 8%? 0 What is the expected total return on the ve-year bond as of January 1, 2003? g) If you were a tax-qualied investor, which of the three bonds would you prefer, and Why? h) If you thought interest rates were going to fall, what type of bonds would you buy to maximize your short term capital oanance? 3. Manguinnos' dividend per share is expected to grow indenitely at 5% per year, keeping pace with the overall growth of the economy. |f next year's dividend is $10 and the market's required yield is 10%, what is the current share price? 6. Marle Construcciones' stock price at January 1, 2002 is $22 and is expected to grow at 5% per year: a) What is the expected rate of return at the beginning of 2002? The expected dividend for that year would be $3. b) What was the expected dividend yield and capital gains on January 1, 2003? What is the relationship between the dividend yield and capital gains under the growth assumption? 7. Suppose investors believe that Cabanas Paul shares will grow at 5% for only ve years, then decline to 2% What would be the price of Cabanas Paul shares if the specied yield is 15% and next year's dividend will be S 100? 9. Companies A and B showed the following financial statements as of September 3, 2002 and you are to calculate the PER for the following apportionment rates : a) 1%; D) 50%; and c) 00%. A B Net worth 122200.000 62.700000 Target prot 3.300 000 8.400.000 ke 20% 20% 8. Caracol is contemplating issuing shares to nance an expansion project. Caracol's nancial analysts have determined that the project has the same risk as the market portfolio, which has an expected return of 5 o and a risk-free rate of 5%. The return on the project is estimated at 20%. The project will proceed unless: a) The company's Beta is greater than 1.5. b) The company's Beta ae is less than 1.5. :2) Whatever the Beta of the company, as whatever imposes is the Beta to the project