1. )Careers Unlimited issued a bond, with a $1000 par value, 10 years ago that h
ID: 2711370 • Letter: 1
Question
1. )Careers Unlimited issued a bond, with a $1000 par value, 10 years ago that has 8 years remaining to maturity and an annual coupon rate of 12 percent. The interest payments are made every six months. If the current market price is $1230, what is the yield to maturity?
A. 4%
B. 5%
C. 8%
D. 10%
E. 12%
2.) Given the followng partial stock quote, what was the closing price on the previous trading day if the firm's earnings per share are $1.85?
Stock(Div) Div yld% close price Net chg
Alpha Ind. 3.2% $16.93 -.16
A. $16.71
B. $16.77
C. $16.89
D. $17.09
E. $17.40
3. )Which one of the following represents the capital gains yield as used in the Gordon Growth or dividend growth model?
A. DI
B. DI/P0
C. P0
D. g
E. g/PO
Explanation / Answer
1)Semiannual Interest= 1000* .12*6/12 = 60
semiannual months =8*2 =16
YTM =[Interest + (face value -price)/years]/[(face value +price)/2]
= [60 + (1000- 1230 )/16] /[(1000+1230)/2]
= [60 + (-230/ 16)] /[2230/2]
= [60 - 14.375] / 1115
= 45.625/1115
= .0409 or 4.09% semiannually or 8.18% annaully (4.09*2)
correct option is "C" -8% (approx 8%)
2)correct option is "B" -16.77
[16.93-.16]
3)correct option is "B" -D1/P0
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