If the growth rate increases the price of the stock will O i

If the growth rate increases, the price of the stock will O increase O decrease O stay the same O more information is needed to answer the question QUESTION 8 Walmart\'s bonds mature in 7 years, have a face value of $1,000, and make an annual coupon interest payment of $60. The market requires an interest rate of 8% on these bonds. What is the current market price of the bond? $940.29 $885.07 $895.87 $907.54 QUE STION 9 The beta for a stock decreases from 0.90 to 0.75. The stock\'s O risk has decreased O risk has increased Osales has decreased sales has increased

Solution

question 7::

A. Increase.

The growth rate and the price of the stock are directly related, an increase in the growth rate will lead to an increase in the stock price.

question 8:

C.$895.87

the following is the calculation of bond price:

[present value of annuity factor * interest payment] + [present value factor * face value of bond]

here,

present value of annuity factor = [1- (1+r)^(-n)]/r

=> [1 - (1.08)^(-7) ] / 0.08

=>5.20637.

interst payment=$60

present value factor = 1 /(1+r)^n

=> 1 /(1.08)^7

=>0.5834904.

face value = $1,000.

now,

current market price of the bond = [5.20637 * $60] + [0.5834904 * $1,000]

=>$312.38 + 583.4904

=>$895.87.

question 9:

A.risk has decreased.

Beta is a measure of risk and a decrease in its value implies the risk has reduced.