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(6) You intend to purchase a 10-year, RM1,000 face value bond that pays interest of RM60 every 6 months. If your nominal annual required rate
(6) You intend to purchase a 10-year, RM1,000 face value bond that pays interest of RM60 every 6 months. If your nominal annual required rate of return is 10 percent with semiannual compounding, how much should you be willing to pay for this bond? (5 marks) (c) A share of common stock has just paid a dividend of RM3.00. If the expected long- run growth rate for this stock is 5 percent, and if investors require an 11 percent rate of return, what is the price of the stock? (4 marks) (d) The last dividend paid by a company was RM2.20. The growth rate is expected to be 10 percent for one year, after which dividends are expected to grow at a rate of 6 percent forever. The company's stockholders require a rate of retum on equity (I) of 11 percent. What is the current price of the stock? (6 marks) (e) The last dividend paid by Klein Company was RM1.00. Klein's growth rate is expected to be a constant 5 percent for 2 years, after which dividends are expected to grow at a rate of 10 percent forever. Klein's required rate of return on equity (1) is 12 percent. What is the current price of Klein's common stock? (6 marks) [Total: 25 Marks)
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