Q2. Suppose a 3 year bond with a 6% coupon rate that was purchased for $760 and had a promised yield of 8%. Suppose that interest rates increased and the price of the bond declined. Displeased, you sold the bond for 798.8 after having owned it for 1 year. What is the realized yield ? 1 mark

Q3. Ahmed is interested in purchasing the common stock of Inch, Inc., which is currently priced at $ 40. The company is expected to pay a dividend of $3 next year and to grow at a constant rate of 8 percent. 1.5 marks

a. What should the market value of the stock be if the required rate of return is 15.75 percent?

b. Is this a good buy? Why or why not?

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