Question
Please see attached document- it reads the same information. Need specific detailed solutions please To fill out the first table, you will need to select
Please see attached document- it reads the same information. Need specific detailed solutions please
To fill out the first table, you will need to select 3 bonds with maturities between 10 and 20 years with bond ratings of "A to AAA," "B to BBB" and "C to CC" (you may want to use bond screener at the Web site linked above).All of these bonds will have these values (future values) of $1,000. You will need to use a coupon rate of the bond times the face value to calculate the annual coupon payment. You should subtract the maturity date from the current year to determine the time to maturity. The Web site should provide you with the yield to maturity and the current quote for the bond. (Be sure to multiply the bond quote by 10 to get the current market value.) You will then need to indicate whether the bond is currently trading at a discount, premium, or par.
Bond | Company/ Rating | Face Value (FV) | Coupon Rate | Annual Payment (PMT) | Time-to Maturity (NPER) | Yield-to-Maturity (RATE) | Market Value (Quote) | Discount, Premium, Par |
A-Rated | $1,000 | |||||||
B-Rated | $1,000 | |||||||
C-Rated | $1,000 |
- Explain the relationship observed between ratings and yield to maturity.
- Explain why the coupon rate and the yield to maturity determine why the bonds would trade at a discount, premium, or par.
- Based on the material you learn in this Phase, what would you expect to happen to the yield to maturity and market value of the bonds if the time to maturity was increased or decreased by 5 years?
In this step, you have been asked to visit a credible Web site that provides detailed information on publicly traded stocks and select 1 that has at least a 5-year history of paying dividends and 2 of its closest competitors.
To fill up the first table, you will need to gather information needed to calculate the required rate of return for each of the 3 stocks. You will need to calculate the risk-free rate for this assignment. You will need the market return that was calculated in Phase 2, and the beta that you should be able to find on the Web site.
Company | 5-year Risk-Free Rate of Return | Beta (?) | 5-Year Return on Top 500 Stocks | Required Rate of Return (CAPM) |
To complete the next table, you will need the most recent dividends paid over the past year for each stock, expected growth rate for the stocks, and the required rate of return you calculated in the previous table. You will also need to compare your results with the current value of each stock and determine whether the model suggests that they are over- or underpriced.
Company | Current Dividend | Projected Growth Rate (next year) | Required Rate of Return (CAPM) | Estimated Stock Price (Gordon Model) | Current Stock Price | Over/Under Priced |
In the third table, you will be using the price to earnings ratio (P/E) along with the average expected earnings per share provided by the Web site. You will also need to compare your results with the current value of each stock to determine whether or not the model suggests that the stocks are over- or underpriced.
Company | Estimated Earning (next year) | P/E Ratio | Estimated Stock Price (P/E) | Current Stock Price | Over/Under Priced |
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