Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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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
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Transcribed Image Text: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
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