Liquidity premium versus a zero liquidity premium for t-bond

Assignment Help Financial Management

Reference no: EM131319620

A stock analyst is looking to use a model that will predict the value of XYZ’s stock price per share. XYZ currently pays a dividend of $2 per share. The analyst predicts that XYZ will grow the dividend by 2% for two consecutive years, and then, beginning in year 3, will grow the dividend by 1% per year each and every year thereafter forever. The required rate of return of XYZ is 8%. Using these analyst projections, which of the following comes closest to the predicted price per share of XYZ?

A. $29.41

B. $30.70

C. $27.57

D. $25.78

E. $28.45

2. If 10 year T-bonds have a yield of 6.0%, 10 year corporate bonds yield 8.5%, the maturity risk premium on all 10-year bonds is 1,3% and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond?

a. 1.90%

b. 2.10%

c. 2.30%

d. 2.50%

Reference no: EM131319620

Questions Cloud

What is the mean value of pa under this distribution : Sketch the posterior probability P(pa | s=aba, F =3). What is the most probable value of pa (i.e., the value that maximizes the posterior probability density)? What is the mean value of pa under this distribution?

Coupon bonds on market-what is the yield to call for bonds : Atlantis Fisheries issues zero coupon bonds on the market at a price of $447 per bond. These are callable in 10 years at a call price of $560. Using semiannual compounding, what is the yield to call for these bonds?

Smoking one year after the treatment : In a study of smokers who tried to quit smoking with nicotine patch therapy, 39 were smoking one year after the treatment, and 32 were not smoking one year after the treatment.

Write about the importance of the work to contemporary ideas : You are to write about the importance of the work to contemporary ideas. What is the work about? Is the artist significant to today art environment

Liquidity premium versus a zero liquidity premium for t-bond : If 10 year T-bonds have a yield of 6.0%, 10 year corporate bonds yield 8.5%, the maturity risk premium on all 10-year bonds is 1,3% and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T-bonds, what is the default ris..

Does managed care lead to a better or worse quality of care : Does Managed Care Lead to a better or Worse Quality of Care? If it leads to a worse quality.Explain ways we can improve managed care.

Difference between dependent and independent variables : What is the difference between dependent and independent variables? On which side of the regression equation does each lie? Describe how Doane's rule relates to the number of allowed independent variables. Why is this important?

Difference between the proportion of americans : Is there any difference between the proportion of Americans who wish they were rich and the proportion of Canadians who wish they were rich? A random sample of 1,000 Americans showed that 550 wish they were rich, while a random sample of 500 Canad..

What are mathematical shapes of the curves between the curve : By how much could the size of a file be reduced given that it is an ASCII file? How would you achieve this reduction?

User Account

All Pages