1.Suppose aten-year, $1,000 bond with an 8.4% coupon rate and semiannual coupons is trading for $1,034.12.

a. What is thebond's yield to maturity(expressed as an APR with semiannualcompounding)?

b. If thebond's yield to maturity changes to 9.7% APR, what will be thebond's price?

2.SARcompany's ordinary shares are expected to pay$ 2.5 per share in dividends in 4 years and after which the dividends are expected to grow at 1% annually forever. CompanyABC's shares have a beta of 1.3. Thelong-term return of ASX200 is 9.1% and the return ofT-bonds is 4.3%.

a.What is the expected return ofSAR's shares according to theCAPM?

b.What is the implied price pershare?