3. A twenty-year bond with a 8% coupon rate and a face value of sioo makes semi-

Question

3. A twenty-year bond with a 8% coupon rate and a face value of sioo makes semi- annual coupon payments. Required return for bonds of equivalent risk is 0% Calculate the market value of the bond . 10 pt 4a. You are contemplating buying some stocks of E-FIN.com which. The firm's most recent annualized dividend is $1.80 per share and this is expected to grow at 6% perpetually. Investors in similar firms in the industry require 15% return. Using the Gordon growth model, calculate its current price. (6 pt.) 4b The current price of ABC stock is S5000. Dividends are expected to grow at 6% indefinitely and the most recent dividend was $2.20. What is the required rate of return on ABC stock? (4 pt.)

Explanation / Answer

3..

market value of the bond

=(1000*8%/2)*((1-(1+(6%/2))^(-20*2))/(6%/2))+1000/(1+(6%/2))^(20*2)

=1231.15

the above is the answer

we do only one question based on Chegg rules.

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