User Account

All Pages

What is each bonds expected capital gains yield today

Assignment Help Financial Management
Reference no: EM131314671

Use the following corporate bond quote information to answer the questions that follow. Since this is a corporate bond, assume the company makes semi-annual coupon payments and also assume the bond matures on today’s date in its maturity year.

Bond          Cur.     Yld.      Vol.   Close      Net Chg.

Doh! 9 ½    18     9.0          5      105 1/2      - 1/4

Doh! 8 ½     21     9.4        10      90 1/4        -1/2

1. How much would each bond cost you to buy today if its face value is $1000?

2. How much would each bond cost you yesterday if its face value were $1000?

3. What is each bond’s yield to maturity?

4. What is each bond’s expected capital gains yield today?

5. Now imagine you purchased each bond today at the current price. A year later the yield to maturity for each bond falls by one percentage point. What is your total rate of return for each bond?

6. Now imagine the same scenario in #5 (the last question) except the yield to maturity for each bond increases one percentage point for each bond a year later. What is your total rate of return for each bond?

7. Which bond do you prefer in #5, and what type of risk are you more exposed to if you choose this particular bond?

8. Which bond do you prefer in #6, and what type of risk are you more exposed to if you choose this particular bond?

Reference no: EM131314671

Questions Cloud

The firm is expected to increase its dividend : The current dividend for Woods Corp. is $4 per share. The firm is expected to increase its dividend by 15% during the next year and then decrease the growth rate of dividend payouts to a constant 10% per year thereafter. If the required return on the..
Per a financial analysts projection : Per a financial analyst’s projection, DP’s stock will be worth $60 per share in three years. The company just paid a dividend of $1.50 per share and expects an annual increase of $0.50 in dividend per share during the next three years. If you require..
Decrease the growth rate of dividend payouts to constant : The current dividend for Woods Corp. is $4 per share. The firm is expected to increase its dividend by 15% during the next year and then decrease the growth rate of dividend payouts to a constant 10% per year thereafter. If the required return on the..
What is each bonds expected capital gains yield today : Use the following corporate bond quote information to answer the questions that follows. since this is a corporate bond, assume the company makes semi-annual coupon payments and also assume the bond matures on today's date in its maturity year. what ..
What is each bonds expected capital gains yield today : Since this is a corporate bond, assume the company makes semi-annual coupon payments and also assume the bond matures on today’s date in its maturity year. What is each bond’s yield to maturity? What is each bond’s expected capital gains yield today?
About the portfolios beta : Your investment club has only two stocks in its portfolio; $15,000 is invested in a stock with a beta of 0.4, and $60,000 is invested in a stock with a beta of 2.4. what is the portfolios beta?
What is the required rate of return on stock with beta : Assume that the risk-free rate is 4.5% and that the market risk premium is 7%. What is the required rate of return on a stock with a beta of 1.1? What is the required rate of return on a stock with a beta of 1.9? What is the required return on the ma..
What is required rate of return on stock : AA Industries's stock has a beta of 2.2. The risk-free rate is 5.5%, the expected return on the market is 14%. What is the required rate of return on AA's stock?
Assume the car price stays the same : You would like to buy a Mercedes Benz Class A. You have about $20,000 but the car costs $55,000. If you can earn 3% per annum, how much do you have to invest (today) to buy the car in 2 years? Assume the car price stays the same.

Reviews

Write a Review

Financial Management Questions & Answers

  Changing interest rates is called interest rate risk

Bond valuation relationship: You own a bond that pays $120 in annual interest with a $1,1000 par value. It matures in 10 years. The market's required yield to maturity on a comparable risk bond is 11%. what is the value of the bond if the markets req..

  Long-term debt or equity to pay current liabilities

What are the possible consequences if a company uses short-term debt to fund long-term projects, and uses long-term debt or equity to pay current liabilities?

  Shares of common stock outstanding at a price per share

Western United has 154,000 shares of common stock outstanding at a price per share of 38.50. There are 15,000 shares of preferred stock outstanding at a price of 69/share. The firm also holds 3600 bonds outstanding that are currently selling at par. ..

  Workers themselves can invent labor-saving machinery

According to Smith, social harmony comes from economic exchanges in which people act.  Which one of the following is a role for government that Smith saw as essential? The division of labor tends to be greatest in less economically developed countrie..

  What is the net cash flow of the project

Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,430,000. The fixed asset falls into the three-year MACRS class (MACRS Table). The project is estimated to generate $2,260,000 in a..

  Describe the concept of zero-base budgeting

Explain the concept of management control and how budgeting is used as part of it - Describe the concept of zero-base budgeting.

  Use present value of annuity table

How much money does Melinda need to deposit into her investment account today if she wishes to withdraw $8,000 a year for twenty years? She expects to earn an average rate of return of 11 percent. (Choose the closest answer, use present value of annu..

  Considering new three-year expansion project

Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.79 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be w..

  Expending their operations into a new line of pastries

The Leventhal banking company is thinking of expending their operations into a new line of pastries. The form expects to sell $350,000 of the new product in the first year and $500,000 each year thereafter. Prepare a statement showing the incremental..

  Semi annually to cover estimated trade-in difference

Antonio plans to buy a new car three years from now. Rather than borrow at that time, he plans to invest part of a small inheritance at 7.5% compounded semi annually to cover the estimated $6000 trade-in difference. How much does he need to invest if..

  Prepare gulings statement of cash flows for the year end

Construct a statement of cash flows.- Prepare Guling's statement of cash flows for the year ended December 31, 2014, complete with its proper heading.

  Discount interest-what is the interest rate on this loan

This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $20,000 for one year. The interest rate is 17.25 percent. What is the interest rate on this loan?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd