QUESTION 3 Sharon has one share of stock and one bond. The total value of the two securities is $1,118.39. The stock pays annual dividends. The next dividend is expected to be $16.12 and paid in one year. In two years, the dividend is expected to be $13.15 and the stock is expected to be priced at $239.76. The stock has an expected return of 11.04 percent per year. The bond has a coupon rate of 6.60 percent and a face value of $1,000; pays semi-annual coupons with the next coupon expected in 6 months; and matures in 17.5 years. What is the YTM of the bond? 7.77% (plus or minus 4 bps) 3.83% (plus or minus 4 bps) 7.66% (plus or minus 4 bps) 8.25% (plus or minus 4 bps) O the answer cannot be obtained based on the given information

QUESTION 3 Sharon has one share of stock and one bond. The total value of the two securities is $1,118.39. The stock pays annual dividends. The next dividend is expected to be $16.12 and paid in one year. In two years, the dividend is expected to be $13.15 and the stock is expected to be priced at $239.76. The stock has an expected return of 11.04 percent per year. The bond has a coupon rate of 6.60 percent and a face value of $1,000; pays semi-annual coupons with the next coupon expected in 6 months; and matures in 17.5 years. What is the YTM of the bond? 7.77% (plus or minus 4 bps) 3.83% (plus or minus 4 bps) 7.66% (plus or minus 4 bps) 8.25% (plus or minus 4 bps) O the answer cannot be obtained based on the given information

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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8. A bond with a par value of 30,000 is priced at 108.40 of par and has 10 years remaining until maturity. The bond has an 8% coupon rate, paid semi-annually. What is the amount of next coupon payment? A. 600 B. 1200 C. 2400 D. 3252 E. None of above 9. ABC common stock is expected to have extraordinary growth in earnings and dividends of 25% per year for year 2 and 3, after which the growth rate will settle into a constant 5%. If the required return by investors is 13% and next year's dividend is 4. What should be the approximate current share price? A. 60.58 B. 65.10 C. 68.64 D. 73.56 E. None of above 10. An investor receives a 15% total return by purchasing a stock for 40 and selling it after one year with a 5% capital gain. What is the selling price after one year?. A. 40 B. 42 C. 44 D. 46 E. None of above 11. A stock has the following information. What is the stock price? ● Required rate of return: 14% ● ROE: 15% ● Plowed back ratio: 40% Expected dividend: 1 ● A. 12.5 B. 13.5 C.…
Information about three securities appears next. Stock 1 Stock 2 Bond 1 Beginning-of-Year Price Stock 1 Stock 2 Bond 1 $ 44.20 $ 2.95 $ 1,190 End-of-Year Price $ 48.45 $3.18 $ 1,218 a. Assuming interest and dividends are paid annually, calculate the annual holding period return on each security. Note: Round your answers to 1 decimal place. X Answer is not complete. Annual Holding Period Return 16.9 % 7.8 % % Interest/Dividend Paid $ 3.20 $.00 $ 58.00
Bond returns Last year, Joan purchased a $1,000 face value corporate bond with an 9% annual coupon rate and a 10-year maturity. At the time of the purchase, it had an expected yield to maturity of 11.6%. If Joan sold the bond today for $1,116.07, what rate of return would she have earned for the past year? Round your answer to two decimal places. Current yield, capital gains yield, and yield to maturity Hooper Printing Inc. has bonds outstanding with 10 years left to maturity. The bonds have an 9% annual coupon rate and were issued 1 year ago at their par value of $1,000. However, due to changes in interest rates, the bond's market price has fallen to $950.70. The capital gains yield last year was - 4.93%. What is the yield to maturity? Round your answer to two decimal places. % For the coming year, what is the expected current yield? (Hint: Refer to Footnote 7 for the definition of the current yield and to Table 7.1.) Round your answer to two decimal places. %For the…
Accounting Jenna bought a bond that was issued by Sherlock Watson Industries (SWI) three years ago. The bondhas a $1,000 maturity value, a coupon rate equal to 9 percent, and it matures in 17 years. Interest is paidevery six months; the next interest payment is scheduled for six months from today. Suppose that James just bought the same bond that Joan bought, but he bought it two years later for$1,034.55. If James plans to hold his bond for five years and its YTM does not change during thatperiod, what return will he earn each year? What portion of the annual return represents capital gainsand what portion represents the current yield?
Julie has one share of stock and one bond. The total value of the two securities is $1,102.14. The stock pays annual dividends. The next dividend is expected to be $15.15 and paid in one year. In two years, the dividend is expected to be $11.79 and the stock is expected to be priced at $254.84. The stock has an expected return of 11.19 percent per year. The bond has a coupon rate of 7.10 percent and a face value of $1,000; pays semi-annual coupons with the next coupon expected in 6 months; and matures in 17.5 years. What is the YTM of the bond? 8.68% (plus or minus 4 bps) 8.51% (plus or minus 4 bps) 4.26% (plus or minus 4 bps) 9.25% (plus or minus 4 bps) the answer cannot be obtained based on the given information
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uppose you purchased a corporate bond with a10-year maturity, a $1,000 par value, a 10% couponrate, and semiannual interest payments. This meansthat you receive a $50 interest payment at the end ofeach six-month period for 10 years (20 times). Then,when the bond matures, you will receive the principalamount (the face value) in a lump sum. Three yearsafter the bonds were purchased, the going rate ofinterest on new bonds fell to 6% (or 6% compoundedsemiannually). What is the current market value (P)of the bond (three years after its purchase)?
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Sara has one share of stock and one bond. The total value of the two securities is $1,123.21. The stock pays annual dividends. The next dividend is expected to be $14.95 and paid in one year. In two years, the dividend is expected to be $13.42 and the stock is expected to be priced at $299.76. The stock has an expected return of 13.82 percent per year. The bond has a coupon rate of 6.20 percent and a face value of $1,000; pays semi-annual coupons with the next coupon expected in 6 months; and matures in 17.5 years. What is the YTM of the bond? O7.68% (plus or minus 4 bps) 3.79% (plus or minus 4 bps) O7.57% (plus or minus 4 bps) 8.35% (plus or minus 4 bps) the answer cannot be obtained based on the given information
Assume an investor buys a newly issued 8 percent, semiannual 10 year bond at par. He sells it two years later when market interest rates have decreased to 6 percent. How much is the investor’s capital gain or loss? $147.20 gain $70.20 gain $125.61 gain $124.20 loss

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