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# Stock and Bond questions

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11. What is the yield-to-maturity of the following bond? WHY?

Price = 113

Discount Rate Present Value of Cash Flow of Bond
6% 120
8% 114
9% 112
10% 98

12. What is the return on the following investment?

Income = \$400
Price t=0 = \$3000
Price t=1 = \$4000

13. Given the following information, calculate the Price of the stock.

g = 8%

r = 9%

d(1) = \$4

14. Given the following data, calculate the price earnings ratio for the stock,
g = 8%

r = 9%

Payout ratio of earnings = 40%

#### Solution Preview

11. What is the yield-to-maturity of the following bond? WHY?

Price = 113

Discount Rate Present Value of Cash Flow of Bond
6% 120
8% 114
9% 112
10% 98

The yield-to-maturity (YTM) of a bond is the discount rate which will make the present value of the cash flow of the bond equal to the price today. The price today is 113. At ...

#### Solution Summary

The solution explains the calculation of yield to maturity, return on investment, price of stock and price to earnings ratio

\$2.49