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eBook Dynamic Systems has an outstanding bond that has a $1,000 par value and a 10 percent coupon rate. Interest is paid semiannually. The bond has 13 years remaining unt matures. Today the going interest rate is 12 percent, and it is expected to remain at this level for many years in the future. a. Compute the current yield. Do not round intermediate calculations. Round your answer to two decimal places. % b. Compute the capital gains yield that the bond will generate this year. Do not round intermediate calculations. Round your answer to two decimal places.

eBook Dynamic Systems has an outstanding bond that has a $1,000 par value and a 10 percent coupon rate. Interest is paid semiannually. The bond has 13 years remaining unt matures. Today the going interest rate is 12 percent, and it is expected to remain at this level for many years in the future. a. Compute the current yield. Do not round intermediate calculations. Round your answer to two decimal places. % b. Compute the capital gains yield that the bond will generate this year. Do not round intermediate calculations. Round your answer to two decimal places.

Essentials Of Investments
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
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Bill Clinton reportedly was paid $10.5 million to write his book My Life. The book took three years to write. In the time he spent writing, Clinton could have been paid to make speeches. Given his popularity, assume that he could earn $8.4 million per year (paid at the end of the year) speaking instead of writing. If his cost of capital is 9.9% per year, then the NPV of agreeing to write the book (ignoring any royalty payments) is $10,426,388. How many IRRs are there in this problem? Does the IRR rule give the right answer in this case? (Note: Consider the upfront payment as a positive cash flow and the opportunity cost of missed speaking fees as negative cash flows.) The IRR is %. (Round to two decimal places.)
Transcribed Image Text:Bill Clinton reportedly was paid $10.5 million to write his book My Life. The book took three years to write. In the time he spent writing, Clinton could have been paid to make speeches. Given his popularity, assume that he could earn $8.4 million per year (paid at the end of the year) speaking instead of writing. If his cost of capital is 9.9% per year, then the NPV of agreeing to write the book (ignoring any royalty payments) is $10,426,388. How many IRRs are there in this problem? Does the IRR rule give the right answer in this case? (Note: Consider the upfront payment as a positive cash flow and the opportunity cost of missed speaking fees as negative cash flows.) The IRR is %. (Round to two decimal places.)
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