1. Greenbrier Industrial Products\' bonds have a 7.60 percent coupon and pay int
ID: 2702544 • Letter: 1
Question
1. Greenbrier Industrial Products' bonds have a 7.60 percent coupon and pay interest annually. The face value is $1,000 and the current market price is $1.062.50 per bond. The bonds mature in 16 years. What is the yield to maturity?
2. Boynton Manufacturers made two announcements concerning its common stock today. First, the company announced that the next annual dividend will be $1.75 per share. Secondly, all dividends after that will decrease by 1.5 percent annually. What is the maximum amount you should pay to purchase a share of this stock today if your require a 14 percent rate of return?
3. Last year, you purchased 500 shares of Analog Devices, Inc. stock for $11.16 a share. You have received a total of $120 in dividends and $7,190 from selling the shares. What is your capital gains yield on this stock?
Explanation / Answer
1) 1062.50 = 76 * PVIFA(r%,16) + 1000 * PVIF(r%,16)
using bond calculator
yield to maturity = 6.94%
2)price = D1/r-g
= 1.75/14% - (-1.5%)
= 1.75/15.5% = 11.29
3) capital gains = ( 7190/500 - 11.16)/11.16 = 28.85%
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.