What is value of the stock for you

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Reference no: EM13132188

National Steel 15-year, $1,000 par value bonds pay 8 percent interest annually. The market price of the bonds is $1,085, and your required rate of return is 10 percent.

a. Compute the bond’s expected rate of return.

b. Determine the value of the bond to you, given your required rate of return.

c. Should you purchase the bond?

The common stock of NCP paid $1.32 in dividends last year. Dividends are expected to grow at an 8 percent annual rate for an indefinite number of years.

a. If NCP’s current market price is $23.50 per share, what is the stock’s expected rate of return?

b. If your required rate of return is 10.5 percent, what is the value of the stock for you?

c. Should you make the investment?

Reference no: EM13132188

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