Explore BrainMass

# Yield to maturity, price, value of stock, required rate of return

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

1. Wilson Wonders' bonds have 12 years remaining to maturity. interest is paid annually, the bonds have a \$1,000 par value, and the coupon interest rate is 10% the bonds sell at a price of \$850. What is their yield to maturity?

2. Renfro Rentals has issued bonds that have a 10% coupon rate, payable semiannually. The bonds mature in 8 years, have a face value of \$1,000, and a yield to marutity of 8.5%. What is the price of the bonds?

3. Boehm Incorporated is expected to pay a \$1.50 per share dividend at the end of the year (i.e. D1 = \$1.50). The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock, rs, is 15%. What is the value per share of the company's stock?

4. Basil Pet products has preferred stock outstanding which pays a dividend of \$5 at the end of each year. The preferred stock sells for \$50 a share. What is the preferred stock's required rate of return?

#### Solution Preview

1. Wilson Wonders' bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a \$1,000 par value, and the coupon interest rate is 10% the bonds sell at a price of \$850. What is their yield to maturity?

We have,
Time to maturity=12 years
Par value=\$1,000
Coupon rate=10%
Price of the bond=\$850
Hence,

As it is difficult to calculate YTM with ...

#### Solution Summary

The yield to maturity, price, value of stock and the required rate of return is determined.

\$2.19