AWN 7 B E F G H 1 K You would like to make an investment in American Electric Power (AEP), a utility company, but are unsure what type 3 of investment to make. AEP has debt and common stock outstanding, 5 You expect AEP to pay a dividend of $2.50 per share which is forecasted to grow by 3.5% per year forever. 6 You require a 9.5% rate of return 8 Bond A has a 10.5 percent coupon with nine years to maturity, makes semi-annual payments and has a yield 9 to maturity (YTM) of 7% 10 11 Bond B has a 6.75% coupon with nine years to maturity, makes semi-annual payments and is currently selling 12 at 98.35% of par 13 14 15 Part A 16 What price would you be willing to pay for Bond A assuming a $1,000 par value. (5 points) 17 18 19 20 21 22 23 Part B 24 you had a $50,000 par value, how much would you be willing to pay for Bond A? points) 25 26 27 28 29 30 31 Part 32 Calculate the yield to maturity for Bond B, assuming a $1,000 par value is points) 33 34 35 36 37 + Question 1 Signature Required Question 2 Questions 3 and 4 Questions Ready 27.472 2. dtv MacBook