You have just purchased a 10 year $1000 par value bond. The coupon rate on this bond is 8 percent annually, with interest being paid each six months. If you expect to earn 10 percent simple rate of return on this bond how much did you pay for it?

You expect to receive $1000 at the end of each of the next three years. You will deposit these payments into an account which pays 10 percent compounded semiannually. What is the future value of these payments, that is, the value at the end of the third year?

Solution Summary

Rate of Return & Future Value are calculated in the case.

A stock has a beta of 1.6, the risk free rate is 4% and the expected market return is 10%. What is the required rate of return using the CAPM model? If the expected return for the stock is 14%, would you recommend purchasing the shares now? Explain your answer in detail.

There are three pieces needed to calculate the value of a stock using the dividends growth model. The current dividend payout and the growth rate of the dividend can be found online. However, the required rate of return must be greater than the growth rate of the dividend.
What happens if the growth rate in dividends i

Investment 1:
Nominal Rate of 9% compounded daily on 365 day year.
Investment 2:
CD that offers $9,000 after 27 months. $7,000 required investment.
If you go with investment #2 by how much will the effective rate of return increase.
** I am able to figure out the EFF of Investment #1 but am having difficulty find

1. Futurevalue of single sum problem.
You put $1,000 in an investment account which earns 7% over the next 20 years, what is the futurevalue of this investment?
2. Holding Period Return
Based on the following information calculate the holding period return:
P0 = $14.00
P1 = $17.40
D1 = $ .42

Investors expect 5% rate of inflation in the future.
Real risk-free rate is equal to 3%
The market risk premium is 5%.
The beta is 2.0
The realized rate of return has averaged 15% over the last five years.
What is the required rate of return.

1. Required rate of return: Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate of return on an average stock is 13 percent, and the risk-free rate of return is 7 percent. By how much does the required return on the riskier stock exceed the required return on the less risky stock?
2. CAPM and required ret

See attached file.
8- 1 EXPECTED RETURN
A stock's returns have the following distribution:
Calculate the stock's expected return, standard deviation, and coefficient of variation.
8- 3 REQUIRED RATE OF RETURN
Assume that the risk- free rate is 6% and the expected return on the market is 13%. What is the required

The real risk-free rate is 2.00%, investors expect a 3.00% future inflation rate, the market risk premium is 4.70%, and Kohers Enterprises has a beta of 1.10. What is the required rate of return on Kohers' stock?