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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%

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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

$2.19