Nancy has one share of stock and one bond. The total value of the two securities is $1,091.62. The stock pays annual dividends. The next dividend is expectedto be $16.02 and paid in one year. In two years, the dividend is expected to be $11.57 and the stock is expected to be priced at $210.71. The stock has anexpected return of 12.67 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 nextcoupon expected in 6 months; and matures in 17.5 years. What is the YTM of the bond?7.62% (plus or minus 4 bps)O 7.73% (plus or minus 4 bps)3.81% (plus or minus 4 bps)8.19% (plus or minus 4 bps)the answer cannot be obtained based on the given information

Answered: Image /qna-images/answer/2ae02526-3e06-4ce3-9dd9-94e39fc3161a.jpg

Answered: Nancy has one share of stock and one…

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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Sara owns one bond A and one bond B. The total value of these two bonds is $1,860.00. Bond A pays semi-annual coupons, matures in 12 years, has a face value of $1,000.00, and pays its next coupon in 6 months. Bond B pays annual coupons, matures in 3 years, has a face value of $1,000.00, has a yield-to- maturity of 10.64 percent, and pays its next coupon in one year. Both bonds have a coupon rate of 9.30 percent. What is the yield-to-maturity for bond A? O 10.54% (plus or minus 2 bps) O 10.92% (plus or minus 2 bps) O 5.92% (plus or minus 2 bps) O 8.87% (plus or minus 2 bps) O none of the answers are within 2 bps of the correct answer
Joel Barber purchased a $1,000 bond for $985. The coupon rate of interest is 8.5 percent, and the bond matures in 10 years. What is Joel's current yield on this bond? a. 8.73 percent b. 8.63 percent c. 9.85 percent d. 8.50 percent
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
PQR has one share of stock and one bond. The total value of the two securities is $1.100. The bond has a YTM of 16.20 percent, a coupon rate of 9.60 percent, and a face value of $1,000; pays semi-annual coupons with the next one expected in 6 months: and matures in 3 years. The stock pays annual dividends that are expected to grow by 4.82 percent per year forever. The next dividend is expected to be $12.40 and paid in one year. What is the expected return for the stock? O a. 9.83% (plus or minus 0.03 percentage points) O b. 9.749% (plus or minus 0.03 percentage points) Oc. 4.92% (plus or minus 0.03 percentage Roints) O d. 5.019% (plus or minus 0.03 percentage points) O e. None of the above is within 0.03 percentage points of the correct answer
Joseph owns investment A and 1 bond B. The total value of his holdings is $2,770.00. Bond B has a coupon rate of 8.08 percent, par value of $1,000.00, YTM of 7.39 percent, 14 years until maturity, and semi-annual coupons with the next coupon due in 6 months. Investment A is expected to pay annual cash flows to Joseph of X per year forever with the first annual cash flow expected in 1 year from today. The expected return for investment A is 7.60 percent. What is X, the fixed annual cash flow that will be paid forever by investment A? O $128.03 (plus or minus $1) O $154.34 (plus or minus $1) O $129.99 (plus or minus $1) O $156.27 (plus or minus $1) O none of the answers are within $1 of the correct answer
Kurt owns a convertible bond that matures in 16 years. The bond has a coupon rate of 6 percent paid semi-annually, a face value of $1,000 and a conversion price of $25. Similar bonds have a current market return of 5.85 percent. The current price of the related stock is $26.50 per share. What is the straight bond value? Multiple Choice A. $1,060.00 B. $1,015.45 C. $972.80 D. $980.78 E. $1,030.00
Last year, Joan purchased a $1,000 face value corporate bond with an 8% annual coupon rate and a 20-year maturity. At the time of the purchase, it had an expected yield to maturity of 9.63%. If Joan sold the bond today for $942.31, what rate of return would she have earned for the past year? Round your answer to two decimal places.
Assume that Peter purchased a 25-year, 7.24 percent coupon (annual payments) bond at par ($1,000). He sold the bond after 4 years for $1,095.55. He reinvested the coupon payments at the 4.75 percent compounded annually. Calculate the bond's total yield.
One year ago , Igor purchased a newly issued 15- year bond for $1,000. The bond's coupon rate of interest is 4.8 percent (paid annually). If the current value of the bond is $1,038 , what are (a) the current yield and capital gains yield Igor earned during the year and (b) the bond's yield to maturity today ? (LO 6-4 & LO 6-5 )
You are considering three investments: Bond that is selling in the market at $1,200. The bond has a $1,000 parvalue, pays interest at 14 percent, and is scheduled to mature in 12 years.For bonds of this risk class, you believe that a 12 percent rate of returnshould be required. Preferred stock ($100 par value) that sells for $80 and pays an annualdividend of $12. Your required rate of return for this stock is 14 percent. Common stock ($35 par value) that recently apaid a $3 dividend. The firm’sreturn on equity is 12.3%. The firm’s earning per share was $5.50 and itpaid $3.20 in dividends per share. The stock is selling for $25, and you thinka reasonable required rate of return for the stock is 20 percent. Required: a. Calculate the value of each security based on your required rate ofreturn. b. Which investment(s) should you accept? Why?
Four years earlier, Janice purchased a $1,000 face value corporate bond with a 6% annual coupon and maturing in 10 years. At the time of the purchase, it had an expected yield to maturity of 8.76%. If Janice sold the bond today for $1,088.39, what rate of return would she have earned for the last four years?
Stacy purchases a $60,000 bond for $57,500. The coupon rate is 6% per year payable quarterly. The bond has a life of 15 years, at which time it can be cashed in for face value. If the bank's interest is 4.8% per year compounded monthly, what is the present worth of the bond?

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