# Calculating PV, current yield, beta and YTM as per details

1. Determine how much you would be willing to pay for an Annuity Due that has the following characteristics: (a) PMT: $5,500, (b) RATE: 8%, and (c) NPER: 15.

2. What is the current yield on a bond that has the following characteristics: (a) Price: $1,055, (b) Coupon Rate: 5%, (c) YTM: 4.6%, and (d) NPER: 22.

3. What is the Beta for XYZ Company, given the following information: (a) Expected Return on Company XYZ's Stock: 9%, (b) Expected Return on the Risk Free Asset: 3%, and (c) Expected Rate of Return on the Market: 9.5%.

4. Calculate the YTM on a bond with the following characteristics: (a) Price: $884, (b) Coupon: $50.00, and (c) NPER: 24.

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1. Determine how much you would be willing to pay for an Annuity Due that has the following characteristics: (a) PMT: $5,500, (b) RATE: 8%, and (c) NPER: 15.

PMT=$5,500

RATE=8%

NPER=15

Type=1 annuity due

FV=0

Price can be found by using PV function in MS ...

#### Solution Summary

There are 4 basic problems. Solutions to these problems depict the methodology to determine PV, YTM, current yield and beta. PV and YTM are calculated by using the built-in functions in MS Excel.

Risk aversion and stocks' prices and earned rates of return: (a) how a decrease in risk aversion would affect stocks' prices and earned rates of return, (b) how this would affect risk premiums as measured by the historical difference between returns on stocks and returns on bonds, and (c) the implications of this for the use of historical risk premiums when applying the SML equation.

In Chapter 7 (Unit 5), we saw that if the market interest rate, rd, for a given bond increased, then the price of the bond would decline. Applying this same logic to stocks, explain (a) how a decrease in risk aversion would affect stocks' prices and earned rates of return, (b) how this would affect risk premiums as measured by the historical difference between returns on stocks and returns on bonds, and (c) the implications of this for the use of historical risk premiums when applying the SML equation. Support your positions.

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