Yield: Yield is the return to be earned from an investment, if hold it for a specific period. Yield includes payment of interest or dividend but does not include capital appreciation. Calculate the yield as follows: Yield = ( Nominal risk free rate + Liquidity premium + Maturity risk premium + Default risk premium ) Given one year Treasury bond rate is 2.4%, one year bond yield is equal to 4.8%, Liquidity premium is equal to 0.3 and maturity risk premium is 0.15.

Question

Want to see the full answer?

Answer 1

Question

Chapter 5, Problem 20PROB

Summary Introduction

Yield:

Yield is the return to be earned from an investment, if hold it for a specific period.

Yield includes payment of interest or dividend but does not include capital appreciation.

Calculate the yield as follows:

Yield=(Nominal risk free rate+Liquidity premium+Maturity risk premium+Default risk premium)

Given one year Treasury bond rate is 2.4%, one year bond yield is equal to 4.8%, Liquidity premium is equal to 0.3 and maturity risk premium is 0.15.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Need soln for this

Muskoka Tourism has announced a rights offer to raise $30 million for a new magazine, titled ‘Discover Muskoka’. The magazine will review potential articles after the author pays a nonrefundable reviewing fee of $5,000 per page. The stock currently sells for $52 per share and there are 3.9 million shares outstanding. Required What is the maximum possible subscription price? What is the minimum? If the subscription price is set at $46 per share, how many shares must be sold? How many rights will it take to buy one share? What is the ex-rights price? What is the value of a right?

Northern Escapes Inc. has 225,000 shares of stock outstanding. Each share is worth $73, so the company’s market value of equity is $16,425,000. Suppose the firm issues 30,000 new shares at the following prices: $73, $69, and $60. What will the effect be of each of these alternative offering prices on the existing price per share?