Please show work What is the yield to maturity of a 23 year bond that pays a cou
ID: 2639450 • Letter: P
Question
Please show work
What is the yield to maturity of a 23 year bond that pays a coupon rate of 8.25% per year and has $1,000 par value and is currently priced at $1,298.05. Assume semi-annual coupon payments. Round the answer to two decimal places in percentage form.
Dan is going to buy a 19 year bond that pays a coupon rate of 11.56% per year and has a $1,000 par value. The bond currently priced at $1,326.92. What is the yield to maturity of this bond? Assume annual coupon payments. Round the answer to two decimal places in percentage form.
Try to determine the required rate of return on Mary Farm Corporation common stock. The firm
Explanation / Answer
Requirement 1:
1298.05 = 41.25*(1-(1+yield/2)^(-23))/(yield/2)+1000/(1+yield/2)^23
=> yiled = 4.84%
Hence,the yiled is 4.84%
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Requirement 2:
1326.92 = 115.60*(1-(1+yield)^(-19))/(yield)+1000/(1+yield)^19
=> yiled = 8.13%
Hence,the yiled is 8.13%
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Requirement 3:
According to the CAPM model,
Required rate of return = risk free rate +beta*(market rate-rsik free rate)
=> required rate of return = 2.38%+1.6*(8.06%-2.38%)
=> required rate of return = 11.47%
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Requiremnt 4:
Beta of the portfolio = 23%*1.50+48%1.32+29%*1.87
=1.52
Hence the beta of the portfolio is 1.52