3. A Macrohard Corp. bond carries an 8% coupon, paid annually and has 10 years to maturity. The par value is $1000 and the required rate of return is 5%. a) Calculate the price of the bond today (Po) (5 points) b) Is this a discount or premium bond? Explain? (5 points) c) Calculate the price of the bond one year from now (P1) (5 points)
3. A Macrohard Corp. bond carries an 8% coupon, paid annually and has 10 years to maturity. The par value is $1000 and the required rate of return is 5%. a) Calculate the price of the bond today (Po) (5 points) b) Is this a discount or premium bond? Explain? (5 points) c) Calculate the price of the bond one year from now (P1) (5 points)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:13:18 M O M
Fnan301FinalExamFall2...ba1995f96f6315dff9f7
g) If projects are mutually exclusive, which project would you accept? (5 points)
i) at 5%
ii) at 15%
h) If projects are independent (not mutually exclusive), which project(s) would you accept? (4
points)
i) at 5%
ii) at 15%
3. A Macrohard Corp. bond carries an 8% coupon, paid annually and has 10 years to maturity. The
par value is $1000 and the required rate of return is 5%.
a) Calculate the price of the bond today (Po) (5 points)
b) Is this a discount or premium bond? Explain? (5 points)
c) Calculate the price of the bond one year from now (P1) (5 points)
d) If you buy the bond today and sell it one year from now, calculate (10 points)
i) Current yield
ii) Capital gains yield
Transcribed Image Text:13:19 M O -
Fnan301FinalExamFall2...ba1995f96f6315dff9f7
5
ii) Capital gains yield
iii) Total rate of return (yield)
4. Based on the following information Calculate
State of Economy Probability of State of Economy Rate of Return if State Occurs
Stock A
Stock B
Recession
0.20
0.05
-0.17
Normal
0.55
0.08
0.12
Вoom
0.25
0.13
0.29
a) The expected return of Stock A (7.5 points)
b) The expected return of Stock B (7.5 points)
c) The expected return of Portfolio where you invest $35,000 in Stock A and $45,000 in Stock B (5
points)
d) Suppose Stock A has a beta of 0.8 and Stock B has a beta of 1.3. If you invest $35,000 in Stock A
and $45,000 in Stock B, what is the beta of this portfolio? (5 points)
e) Expected return on the market (RM) is 10% and the risk-free (rr) is 4%. What must the the
expected return on the portfolio according to CAPM? (Use the beta you have calculated in section d)
for CAPM) (5 points)
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