Return on stocks and bonds
Not what you're looking for?
Please see the attachments.
1) Eastern Electric currently pays a dividend of about $1.64 per share and sells for $27 a share.
a. If investors believe the growth rate of dividends is 3 percent per year, what rate of return do they expect to earn on the stock?
b. If the investors' required rate of return is 10 percent, what must be the growth rate they expect of the firm?
c. If the sustainable growth rate is 5 percent, and the plowback ratio is .4, what must be the rate of return earned by the firm on its new investments?
2) Bond Pricing. A 6-year Circular File bond pays interest of $80 annually and sells for $950. What is its coupon rate, current yield, and yield of maturity?
3) Coupon Rate. General Matter's outstanding bond issue has a coupon rate of 10 percent and a current yield of 9.6 percent, and it sells at a yield to maturity of 9.25 percent. The firm wishes to issue additional bonds to the public at par value. What coupon rate must the new bonds offer in order to sell at par?
Purchase this Solution
Solution Summary
Answers to 3 questions on returns on stocks and bonds:
1) Rate of return, growth rate, return on new investments on stocks.
2) Coupon rate, current yield, and yield of maturity of a bond
3) Coupon rate on a bond so that it sells at par
Purchase this Solution
Free BrainMass Quizzes
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.
Marketing Research and Forecasting
The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.