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Question 1: Calculate the Present Value of each of the following Bonds: Bond A: Maturity: 5 years Face Value: $1000 Coupon Rate: 5.7% Yield
Question 1: Calculate the Present Value of each of the following Bonds: Bond A: Maturity: 5 years Face Value: $1000 Coupon Rate: 5.7% Yield to Maturity: 3.9% Bond B: Maturity: 5 years Face Value: $1000 Coupon Rate: 4.5% Yield to Maturity: 6.8% Question 2: Calculate the Present Value of each of the following Stocks: Stock A: (assume a holding period of 5 years) Resale Value: $15.15 Required Rate of Return: 12.3% Dividend: a constant dividend of $1.52 Stock B: (assume a holding period of 5 years) Resale Value: $17.17 Required Rate of Return: 13.5% Dividend: a constant dividend of $5.48 Question 3: Calculate the Return of each of the following Stocks: Stock A: D = $4.46 Po = $9.52 P = $12.82 Stock B: D = $1.91 Po = $3.71 P1 = $4.27 Question 4: You have $1000 available for an investment. You can either buy Stock A or Stock B from Question 2. Which one do you pick? How many stocks can you buy? Question 5: You have $1000 available for an investment. You can either buy Stock A or Stock B from Question 3. Which one do you pick? How many stocks can you buy? Question 6: Describe how the connection between the Yield to Maturity and the Coupon Rate impacts the Bond Price relative to the Face Value. Use a graph to visualize your explanation
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