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

See similar textbooks

Similar questions

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.
Jacob purchased a bond for $880 with a 9% coupon. He sold the bond after one year when it was paying him a current yield of 10%. What is the holding period return? 9.0% 9.5% 10.0% 11.0% 12.5%
The nominal rate of return is % earned by an investor in a bond that was purchased for $951, has an annual coupon of 9%, and was sold at the end of the year for $1020? Assume the face value of the bond is $1,000.
Last year Janet purchased a $1,000 face value corporate bond with a 10% annual coupon rate and a 20-year maturity. At the time of the purchase, it had an expected yield to maturity of 10.16%. If Janet sold the bond today for $1,045.92, what rate of return would she have earned for the past year? Do not round intermediate calculations. Round your answer to two decimal places. Please show calculations using calculator.
David Hoffman purchases a $1,000 20-year bond with an 8% coupon (annual payments). Yields on comparable bonds are 10%. Bob expects that two years from now, yields on comparable bonds will have declined to 9%. Find his expected yield, assuming the bond is sold in two years.
Last year Janet purchased a $1,000 face value corporate bond with a 7% annual coupon rate and a 10-year maturity. At the time of the purchase, it had an expected yield to maturity of 8.1%. If Janet sold the bond today for $1,086.18, what rate of return would she have earned for the past year? Do not round intermediate calculations. Round your answer to two decimal places.
Linda is interested in purchasing a corporate bond that was issued with an 8% annual coupon a semiannual interest payment of $40, and maturity in fifteen years. What is the par value of this bond?
(6) Maureen purchased a laddered portfolio of par-value bonds with semiannual coupons for $20,918. The bonds had common face amount X and coupon rate 6.8%. There was one bond redeemable at the end of each year for ten years. Maureen's yield on the portfolio was an annual effective rate of 8%. Find X.
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
Last year Janet purchased a $1,000 face value corporate bond with a 10% annual coupon rate and a 15-year maturity. At the time of the purchase, it had an expected yield to maturity of 10.34 %. If Janet sold the bond today for $1,164.56, what rate of return would she have earned for the past year? Do not round intermediate calculations. Round your answer to two decimal places. %
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
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?

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS