Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Hello, Please I need these attached questions to be answered to the best of your knowledge. Suppose you just purchased the following bond. Answer the
Hello,
Please I need these attached questions to be answered to the best of your knowledge.
Suppose you just purchased the following bond. Answer the questions that follow. Bond Information Par Value: Years to Maturity: Coupon: $ 1,000.00 8 $ 60.00 Part A. If you purchase the bond for $945, what is your yield to maturity? Answer part A here. Part B. If your required rate of return is 7%, did you pay above or below the bond's value? Answer part B here. Part C. What price should you have paid for the bond? Answer part B here. After reading this chapter, it isn't surprising that you're becoming an investment wizard. With your newfound expertise you purchase 100 shares of KSU Corporation for $37 per share. Over the next 12 months assume the price goes up to $45 per share, and you receive a dividend of $0.50 per share. Assume you are in the 25% marginal tax bracket and long-term capital gains are taxed at 15%. Part A. What would be your total return (before taxes) on your KSU Corporation investment? Answer Part A here. Part B. Assuming you continue to hold the stock, calculate your after-tax return. Answer Part B here. Part C. How is your realized after-tax return different if you sell the stock? Answer Part C here. Suppose you are just beginning your career and would like to begin investing $100 per month in your 401(k) for the next 20 years. You have choices of investing in the following funds: Growth Fund Diversified with 20% bonds and 80% stocks. Average annual return: 10.3% Balanced Fund Diversified with 40% bonds and 50% stocks. Average annual return: 9.2% Income Fund 1 Diversified with 60% bonds and 40% stocks. Average annual return: 8.1% Income Fund 2 Diversified with 80% bonds and 20% stocks. Average annual return: 7.1% Explain which fund or funds you would invest in and why. As part of your answer, include the ending balance of your investment expected after 20 years. How does risk affect your decision? Use this space for your answer. After studying the fundamental trends from CDX Company's annual report, you have decided to purchase one round lot of the firm's stock on the open market. On Monday morning, you call a stockbroker and ask for the price of CDX stock. The broker indicates that the bid price is $45.20 per share, the ask price is $45.50 per share, and the commission is $38.00. Assuming you wanted to place market order to purchase shares, what is your cost per share, including the commission, and how much would you pay in total? What percentage of the total cost would you pay in commission? Part A. What is your cost per share, including commission? Answer part A here. Part B. How much would you pay in total? Answer part B here. Part C. What percentage of the total cost would you pay in commission? Answer part C here. Suppose you are considering whether to invest in a municipal bond or a corporate bond. Using the information given below, explain which bond you would choose and why. (Hint: Calculate the yield to maturity and the equivalent taxable yield.) Municipal Bond Par Value Coupon Years to Maturity Purchase Price Other Information Marginal Tax Rate $ 1,000.00 $ 50.00 5 $ (990.00) 25.00% Use this space for your answer. Corporate Bond Par Value Coupon Years to Maturity Purchase Price $ 1,000.00 $ 65.00 5 $ (985.00) Suppose you just purchased the following bond. Answer the questions that follow. Bond Information Par Value: Years to Maturity: Coupon: $ 1,000.00 8 $ 60.00 Part A. If you purchase the bond for $945, what is your yield to maturity? Answer part A here. Part B. If your required rate of return is 7%, did you pay above or below the bond's value? Answer part B here. Part C. What price should you have paid for the bond? Answer part B here. After reading this chapter, it isn't surprising that you're becoming an investment wizard. With your newfound expertise you purchase 100 shares of KSU Corporation for $37 per share. Over the next 12 months assume the price goes up to $45 per share, and you receive a dividend of $0.50 per share. Assume you are in the 25% marginal tax bracket and long-term capital gains are taxed at 15%. Part A. What would be your total return (before taxes) on your KSU Corporation investment? Answer Part A here. Part B. Assuming you continue to hold the stock, calculate your after-tax return. Answer Part B here. Part C. How is your realized after-tax return different if you sell the stock? Answer Part C here. Suppose you are just beginning your career and would like to begin investing $100 per month in your 401(k) for the next 20 years. You have choices of investing in the following funds: Growth Fund Diversified with 20% bonds and 80% stocks. Average annual return: 10.3% Balanced Fund Diversified with 40% bonds and 50% stocks. Average annual return: 9.2% Income Fund 1 Diversified with 60% bonds and 40% stocks. Average annual return: 8.1% Income Fund 2 Diversified with 80% bonds and 20% stocks. Average annual return: 7.1% Explain which fund or funds you would invest in and why. As part of your answer, include the ending balance of your investment expected after 20 years. How does risk affect your decision? Use this space for your answer. After studying the fundamental trends from CDX Company's annual report, you have decided to purchase one round lot of the firm's stock on the open market. On Monday morning, you call a stockbroker and ask for the price of CDX stock. The broker indicates that the bid price is $45.20 per share, the ask price is $45.50 per share, and the commission is $38.00. Assuming you wanted to place market order to purchase shares, what is your cost per share, including the commission, and how much would you pay in total? What percentage of the total cost would you pay in commission? Part A. What is your cost per share, including commission? Answer part A here. Part B. How much would you pay in total? Answer part B here. Part C. What percentage of the total cost would you pay in commission? Answer part C here. Suppose you are considering whether to invest in a municipal bond or a corporate bond. Using the information given below, explain which bond you would choose and why. (Hint: Calculate the yield to maturity and the equivalent taxable yield.) Municipal Bond Par Value Coupon Years to Maturity Purchase Price Other Information Marginal Tax Rate $ 1,000.00 $ 50.00 5 $ (990.00) 25.00% Use this space for your answer. Corporate Bond Par Value Coupon Years to Maturity Purchase Price $ 1,000.00 $ 65.00 5 $ (985.00)Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started