A. you offered to buy a 4 year coupon corporate bond in the beginning of its 7th monthon its third year for $963.94. its face value is $1,000 and its coupon rate is 5.172% per annum, with coupon paid at the end of each quarter. Government bond rate now is 6.9%. a. is $963.94 a good price for you to buy it or not ? what is the fair price for the bond ? b. what is the yield if you buy at the price that you been offered ? c. if the government bond rate suddenly goes down to 4.7% what will be the new fair value of the bond ?

A. you offered to buy a 4 year coupon corporate bond in the beginning of its 7th monthon its third year for $963.94. its face value is $1,000 and its coupon rate is 5.172% per annum, with coupon paid at the end of each quarter. Government bond rate now is 6.9%. a. is $963.94 a good price for you to buy it or not ? what is the fair price for the bond ? b. what is the yield if you buy at the price that you been offered ? c. if the government bond rate suddenly goes down to 4.7% what will be the new fair value of the bond ?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 9P

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A. you are offered to buy a 4 year coupon bond in the beginning of its 7th month on its third year for $963.94. its face value is $1,000 and its coupon rate is 5.172% per annum, with coupon paid at the end of each quarter . government bond rate now is 6.9%. a. is $963.94 a good price for you to buy it or not ? what is the fair price for the bond ? b. what is the yield if you buy at the price that you have been offered ? c. if the government bond rate suddenly goes down to 4.7%, what will be the fair value of the bond ? B. the company just paid $1.48 annual dividend and announce the plns to pay $1.54 next year . the dividend growthrate is expected to remain constant at the current level for the following 4 years and then settle at 3% per year , if you are planning to buy this stock in 2 years time, how much would you expect to pay for it if the required rate of return is 7% at the time of your purchase ? ( use two deciaml rounding )
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