Question
1) With market rates generally low, you are searching for a bond investment that paysahigher than usual income. You find one with a coupon rate
1)With market rates generally low, you are searching for a bond investment that paysahigher than usual income. You find one with a coupon rate of 6.5%. It matures in 8years and is priced right now at $1,105.62. If you buy this bond and hold it for the full 8years, what isyour annual return on investment?
2)You see that Fake Company Zeta closed today at $28.50. You also know that the company just announced its most recent annual dividend of $2.32. Plus, the company has a history of increasing dividends about 2.3% each year. Given this information, what is the market communicating about a required return on this stock?
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