a) What is the relationship between the price of a bond and its YTM? b) Explain why some bonds sell at a premium over par value while other bonds sell at a discount. What do you know about the relationship between the coupon rate and the YTM for premium bonds? What about for discount bonds? For bonds selling at par value? c) What is the relationship between the current yield and YTM for premium bonds? For discount bonds? For bonds selling at par value? SEBO PLC just paid a dividend of K2.75 per share. The company will increase its dividend by 20 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on SEBO stock is 13 percent, what will a share of stock sell for today?
QUESTION EIGHT
a) What is the relationship between the price of a bond and its YTM?
b) Explain why some bonds sell at a premium over par
What do you know about the relationship between the coupon rate and the YTM for premium
bonds? What about for discount bonds? For bonds selling at par value?
c) What is the relationship between the current yield and YTM for premium bonds? For discount
bonds? For bonds selling at par value?
SEBO PLC just paid a dividend of K2.75 per share. The company will increase its dividend by 20 percent next year and will then reduce its
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