5. Valuing semiannual coupon bonds Bonds often pay a coupon twice a year. For the valuation of bonds that make semiannual payments, the number of periods doubles, whereas the amount of cash flow decreases by halk. Using the values of cash flows and number of periods, the valuation model is adjusted accordingly. Assume that a $1,000,000 par value, semiannual coupon US Treasury note with five years to maturity has a coupon rate of 3%. The yield to maturity (YTM) of the bond is 11.00%. Using this information and lignoring the other costs involved, calculate the value of the Treasury note: $440,051.83$593,720.72$838,193.965698,494,97 Based on your calculations and understanding of semiannual coupon bonds, complete the following statement: Assuming that interest rates remain constant, the T-note's price is expected to 7. Portfolio expected return and risk A collection of financial assets and securities is referred to as a portfollo. Most individuals and institutions invest in a portfolio, making portfolio risk analysis an integral part of the field of finance. Just like stand-alone assets and securities, portfollos are also exposed to risk. Portfollo risk refers to the possibility that an investment portfolio will not generate the investor's expected rate of return. Analyzing portfolio risk and retum involves the understanding of expected returns from a portfollo. Consider the following case: Andre is an amateur investor who holds a small portfolio consisting of only four stocks. The stock holdings in his portfolio are shown in the following table: What is the expected return on Andre's stock portfollo? 16.05%8.03%14.45%10,70% Suppose each stock in Andre's portfollo has a correlation coefficient of 0.4(=0.4) with each of the other stocks. If the weighted average of the risk. of the individual securities (as measured by their standard deviations) included in the partialiy diversified four-stock portfolio is 35 sh, the portfolio's standard deviation (p) most likely is 35%. Super Carpeting Inc. (SCI) Just paid a dividend (D6) of $2.40 per share, and les annual dividend is expected to grow at a constant rate (g) of 5.00%. per year. If the required return (ft) on 5Cl 's stock is 12.50%, then the intrinsic value of 5CI 's shares is per.share. Use the constant growth model to calculate the appropriate values to complete the following statements about Super. Carpeting Inc: - If Scl's stock is in equisibrium, the current expected dividend yield on the stock will be per share. - SCl's expected stock price one year from today will be per share, If SCl's stock is in equitibrium, the current expected capital gains yieid on 5Cl's stock will be per share. is companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstart, or variable, growth. This woula cause the Expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock. Consider the case of Portman Industries: Portman industries just pald a dividend of $1.92 per share. The company expects the coming year to be very profitable, and its dividend is expected to grow by 16.00% over the next year. After the next year, though, Portman's dividend is expected to grow at a constant rate of 3.20% per year. Assuming that the market is in equilbrium, use the information just given to complete the table. The risk-free rate (rH ) is 4.00%, the market risk premium ( RPM ) is 4.80%, and Portman's beta is 2.00. What is the expected dividend yield for Portman's stock today? 11.45%10.08%8.33%