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Assignment 2 - 3 0 points Bond P is a premium bond with a 1 0 % coupon. Bond D is a 4 % coupon
Assignment points Bond is a premium bond with a coupon. Bond is a coupon bond currently selling at a discount. Both bonds make annual payments, have a YTM of and have eight years to maturity. If interest rates remain unchanged, a what are the expected capital gains yield over the next year for Bond and Bond D points b explain in a couple paragraphs your answers and the interrelationships among the YTM coupon rate, and capital gain yield. points You bought one of BB Cos coupon bonds one year ago for $ These bonds make annual payments, have a face value of $ each, and mature seven years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is If the inflation rate was over the past year, what would be your total real return on investment according to the Fisher equation? points You purchase a bond with an invoice price of $ The bond has a coupon rate of years to maturity, and there are three months to the next semiannual coupon date. What is the flat price of the bond? points The yield to maturity on oneyear zerocoupon bonds is currently percent; the YTM on twoyear zeroes is percent. The federal government plans to issue a twoyearmaturity coupon bond, paying coupons once per year with a coupon rate of percent. The face value of the bond is $ At what price will the bond sell? points An analyst uses the constant growth model to evaluate a company with the following data: Leverage ratio assetequity: Total asset turnover: Current ratio: Net profit margin: Dividend payout ratio: Earnings per share in the past year: $ The required rate on equity: Based on an analysis, the growth rate of the company will drop by percent per year in the next two years and then remain unchanged afterward. Assume that the company will keep its dividend policy unchanged. a Use the multiperiod DDM to estimate the intrinsic value of the company's stock. points b Suppose after one year, everything else will be unchanged but the required rate on equity will decrease to What would be your holding period return for the year? points West Fraser Timber Company WFT is expected to have free cash flow in the coming year of $ million and its free cash flow is expected maintain at a sustainable growth rate of per year. It has a debt worth $ million. It's equity cost of capital is cost of debt before tax is and it pays a corporate tax rate of If WFT Company maintains a debtequity ratio of and the company has million common shares outstanding, what is the fair value of WFT stock? points Problem Options can be used in combination with stocks to reduce risk or to produce income. Buying protective puts guards against downside risk while allowing for upside potential. Writing covered calls allow investors to earn premium income on a stock they expect to remain stable in price. WFX Ltd has a current stock price of $ and does not pay dividends. European call option on the stock is priced $ and European put option is priced $ for share contracts expiring in months, at a strike price of $ What is the total cost of buying a protective put? point What is the total cost of writing a covered call? point What will be the payoff and profit of the protective put if the stock price on maturity is $$$ $ points What will be the payoff and profit of the covered call if the stock price on maturity is $$$ $ points Problem Consider the following funds and the market portfolio: tableMBO Fund,tableClearskyFundTitan Fund,Market PortfolioAverage return,
Assignment points
Bond is a premium bond with a coupon. Bond is a coupon bond currently selling at a discount. Both bonds make annual payments, have a YTM of and have eight years to maturity. If interest rates remain unchanged,
a what are the expected capital gains yield over the next year for Bond and Bond D points
b explain in a couple paragraphs your answers and the interrelationships among the YTM coupon rate, and capital gain yield. points
You bought one of BB Cos coupon bonds one year ago for $ These bonds make annual payments, have a face value of $ each, and mature seven years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is If the inflation rate was over the past year, what would be your total real return on investment according to the Fisher equation? points
You purchase a bond with an invoice price of $ The bond has a coupon rate of years to maturity, and there are three months to the next semiannual coupon date. What is the flat price of the bond? points
The yield to maturity on oneyear zerocoupon bonds is currently percent; the YTM on twoyear zeroes is percent. The federal government plans to issue a twoyearmaturity coupon bond, paying coupons once per year with a coupon rate of percent. The face value of the bond is $ At what price will the bond sell? points
An analyst uses the constant growth model to evaluate a company with the following data:
Leverage ratio assetequity:
Total asset turnover:
Current ratio:
Net profit margin:
Dividend payout ratio:
Earnings per share in the past year: $
The required rate on equity:
Based on an analysis, the growth rate of the company will drop by percent per year in the next two years and then remain unchanged afterward. Assume that the company will keep its dividend policy unchanged.
a Use the multiperiod DDM to estimate the intrinsic value of the company's stock. points
b Suppose after one year, everything else will be unchanged but the required rate on equity will decrease to What would be your holding period return for the year? points
West Fraser Timber Company WFT is expected to have free cash flow in the coming year of $ million and its free cash flow is expected maintain at a sustainable growth rate of per year. It has a debt worth $ million. It's equity cost of capital is cost of debt before tax is and it pays a corporate tax rate of If WFT Company maintains a debtequity ratio of and the company has million common shares outstanding, what is the fair value of WFT stock? points
Problem
Options can be used in combination with stocks to reduce risk or to produce income. Buying protective puts guards against downside risk while allowing for upside potential. Writing covered calls allow investors to earn premium income on a stock they expect to remain stable in price.
WFX Ltd has a current stock price of $ and does not pay dividends. European call option on the stock is priced $ and European put option is priced $ for share contracts expiring in months, at a strike price of $
What is the total cost of buying a protective put? point
What is the total cost of writing a covered call? point
What will be the payoff and profit of the protective put if the stock price on maturity is $$$ $ points
What will be the payoff and profit of the covered call if the stock price on maturity is $$$ $ points
Problem
Consider the following funds and the market portfolio:
tableMBO Fund,tableClearskyFundTitan Fund,Market PortfolioAverage return,
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