Purchase Solution

# yield to maturity

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1. Ginko Inc. has bonds outstanding that mature in 20 years. The bonds have \$1000 par value, pay interest annually at a rate of 10 percent, and have a current selling price of \$875.25. What is the yield to maturity?

2. A share of common stock just paid a dividend of \$3.25 per share. The expected long-run growth rate for this stock is 18%. If investors require a rate of return of 24%, what should the price of the stock be?

3. Vertex bonds have a maturity value of \$1000. The bonds carry a coupon rate of 14 percent. Interest is paid semi-annually. The bonds will mature in seven years. If the current market price is \$1092.65, what is the yield to maturity on the bond?

4. Bangor Company's common stock paid a dividend last year of \$3.70. You believe that the long-term growth in the dividends of the firm will be 8 percent per year. If your required return for Bangor is 14 percent, how much are you willing to pay for the stock?

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What is the yield to maturity?

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1. Ginko Inc. has bonds outstanding that mature in 20 years. The bonds have \$1000 par value, pay interest annually at a rate of 10 percent, and have a current selling price of \$875.25. What is the yield to maturity?

From the TI BA II Plus calculator, we press
N = 20
FV = 1000
PV = - 875.25
PMT = 1000*10% = 100
Then compute CPT:
I/Y = 11.632%

2. A share of common stock just paid a dividend of ...

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