Compute the bonds price today and current yield

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1. A newly issued corporate bond has 20 years to maturity. The bond has a coupon rate of 8 percent and pays interest semiannually. Also the bond is callable in 6 years at a call price equal to 115 percent of par value. The par value of the bonds is #1,000. The yield to maturity is 7 percent.
a. What is the bonds price today?
b. What is the bonds current yield?
c. What is the bonds yield to call?
d. What will be the bonds price one year from today?

2. Stewart Industries just paid a $2.40 per share dividend on its common stock yesterday (Do=$2.40) The dividend is expected to grow at a constant rate of 5 percent a year forever. The stocks beta is 1.2, the risk free rate of interest is 6 percent, and the rate of return on the market is 11 percent.
a. What is the company's current stock price?
b. What is the required rate of return on the stock?
c. What is the price of the stock at the end of year 3?
d. What should be the stock price today?

 

Reference no: EM1359887

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