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1. Yield to Maturity
Calculate the yield to maturity of an 8% coupon bond with 5 years to maturity if the bond sells for $800. The face value of the bond is $1,000.
2. Valuing Stocks with Constant Dividends
A stock pays $2.50 in dividends and has a required rate of return of 12%. Calculate the current price.
What if the required rate of return is 8%

3. Valuing Stocks with Constant Dividend Growth Rates.
A stock pays $2.00 per year in dividends. It is expected to grow at 7% a year.
If your required rate of return is 12% what is the price of the stock.
The growth rate changes to 4%. Now what is the price of the stock?
(required rate of return does not change)

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This solution is comprised of a detailed explanation to calculate the yield to maturity of an 8% coupon bond with 5 years to maturity if the bond sells for $800.

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1. Yield to Maturity
Calculate the yield to maturity of an 8% coupon bond with 5 years to maturity if the bond sells for $800. The face value of the bond is $1,000.

We can determine YTM by using the following formula.

where B is the issued/current price
C is the coupon payment
r is the discount or yield rate
n is the period

Because we need to find the yield to maturity, we need to replace the information given into the equation and calculate for the yield to maturity.

C, which ...

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