Question
Martin Shipping Lines issued bonds 10 years ago at 51,000 per bond. The bonds had a 30-year lift Wier issued, with semiannual payments earsego at
Martin Shipping Lines issued bonds 10 years ago at 51,000 per bond. The bonds had a 30-year lift Wier issued, with semiannual payments earsego at Si.Dal mee be it, percent. This return was in line with required returns by bondholders at that point, as described below:
Real rate of return
Inflation premium
Risk premium
4%
4
5
Total return
13%
Issume that today the inflation premium is only 2 percent and is appropriately reflected in the required turn (or yield to maturity) of the bonds. Compute the new price of the bond.
he Quaid Brothers Corporation has preferred shares outstanding that pay an annual dividend of
14.20. Each has a price of $139.
is the required rate of return (yield on the preferred stock?
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