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20
20. four-year bond has an 8% coupon rate and a face value of $1000. If the current price of the bond is $878.31, calculate the yield to maturity of the bond (assuming annual interest payments).
21A ten -year bond has an 10% coupon rate and a face value of $1000. If the current price of the bond is $1150, calculate the yield to maturity of the bond (assuming annual interest payments).
22 If current price of stock is $25 and you hold it for one year and received dividend of $2.5.You sold it at $27. How much return you received? Show dividend yield and capital gainseparately.
Expert Solution
20) Computatio of Yield to Maturity using Rate Function in Excel:
=rate(nper,pmt,-pv,fv)
Here,
Rate = Yield to Maturity = ?
Nper = 4 years
PMT = $1,000*8% = $80
PV = $878.31
FV = $1,000
Substituting the values in formula:
=rate(4,80,-878.31,1000)
Rate or Yield to Maturity = 12.01%
21) Computatio of Yield to Maturity using Rate Function in Excel:
=rate(nper,pmt,-pv,fv)
Here,
Rate = Yield to Maturity = ?
Nper = 10 years
PMT = $1,000*10% = $100
PV = $1,150
FV = $1,000
Substituting the values in formula:
=rate(10,100,-1150,1000)
Rate or Yield to Maturity = 7.79%
22) Computation of Return:
Return = (Sale Price of Stock - Purchase Price of Stock+Dividend)/Purchase Price of Stock
= ($27-$25+$2.5)/$25
= $4.5/$25
Return = 0.18 or 18%
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