Stock A and stock B have similar characteristics. You believe they should share the same discount rate. Stock B is trading at $50 right now, and it is expected to pay $2 dividend per share NEXT year. And this dividend is expected to grow by 5% forever. Now stock A pays constant dividend at $1.8 per share forever, and its price is trading at $30 per share. So Stock A is: Undervalued Overvalued Fair valued Question 18 (4 points) Bond A and Bond B are issued by the same firm with the same credit rating. You believe they should share the same discount rate (YTM). Bond A pays semi-annual coupons at annual coupon rate of 8%, 4 years to maturity. Bond B pays semi-annual coupons at annual coupon rate of 10%, 5 years to maturity. Bond B is quoted at 120. How much should A be quoted at? 91 121

Answer rating: 100% (QA)

The Answer is in the image, click to view ... View the full answer