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Suppose youre given with the following information for some assets; a 12-year 1.5%- coupon bond of semi-annual coupon payment with face value as $1,000, a
Suppose youre given with the following information for some assets; a 12-year 1.5%- coupon bond of semi-annual coupon payment with face value as $1,000, a common stock of $3.00 expected dividend with 2.5% growth rate currently. Both bond and common stock are issued by Company M&M. Answer the following questions. a) Suppose the yield to maturity (that is, the discount rate) for the bond is 10%, what is the present value of this coupon bond? Is it a discount bond? Why? What if the discount rate is 4%?
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