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Compute the value of Acme Common Stock

Based on the information provided below, compute the value of a bond and the value of common stock (LO 5).

1.  Suppose you have a $1,000 face value bond with 12 years to maturity, a coupon rate of 6% and a yield to maturity of 8%. If the bond makes semiannual payments, what is its price today?

2.  Compute the value of Acme Common Stock if the next dividend is expected to be $1.20 per share. Investors require a 9% rate of return on stocks with the same risk as Acme.

 
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