Six years from today, you expect to place a down payment on a house.  If the required down payment is $22,000 and the interest rate is 5.65% compounded monthly, how much must you save each month (the first savings deposit occurs today, the last 6 years from today)? Round your answer to the nearest cent.

Why do investors require an inflation premium as part of their total return on a security (like a bond)?

Under what market conditions would an investor be more likely to receive yield to call (YTC) than yield to maturity (YTM) on a bond investment? Why?

Several years ago, Lucian Technologies issued preferred stock with a stated annual dividend of [d]% of its $[p] par value. Preferred stock of this type currently yields [r]%. Assume dividends are paid annually. What is the estimated value of Lucian’s preferred stock? Round your answer to the nearest cent. 

Below are the formulas for Exam 2:

What is price risk (aka interest rate risk)? What kinds of bonds have greater price risk?

Suppose that Green Productions sold an issue of bonds with a [t]-year maturity, a $1000 par value, a [c]% coupon rate, and semiannual interest payments and that [x] years after the bonds were issued, the going rate of interest on bonds such as these fell to [r]%. At what price would the bonds sell? Round your answer to the nearest cent.

What do bond ratings reflect or indicate to investors about the borrower?

Below are the formulas for Exam 2:

We covered three scenarios for estimating all future dividends. State each scenario, briefly describe and state how we estimate the stock price under each scenario.