{"id":10595,"date":"2021-10-22T21:14:22","date_gmt":"2021-10-22T21:14:22","guid":{"rendered":"https:\/\/assignmenttutors.net\/blog\/a-25-year-8-semiannual-coupon-bond-with-a-par-value-of-1000-may\/"},"modified":"2021-10-22T21:14:22","modified_gmt":"2021-10-22T21:14:22","slug":"a-25-year-8-semiannual-coupon-bond-with-a-par-value-of-1000-may","status":"publish","type":"post","link":"https:\/\/assignmenttutors.net\/blog\/a-25-year-8-semiannual-coupon-bond-with-a-par-value-of-1000-may\/","title":{"rendered":"A 25-year, 8% semiannual coupon bond with a par value of $1,000 may"},"content":{"rendered":"
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A 25-year, 8% semiannual coupon bond with a par value of $1,000 may be called in 4 years at a call price of $1,100. The bond sells for $950. (Assume that the bond has just been issued.)<\/p>\n

a. What is the bond’s yield to maturity? Round your answer to two decimal places. %<\/p>\n

b. What is the bond’s current yield? Round your answer to two decimal places. %<\/p>\n

c. What is the bond’s capital gain or loss yield? Round your answer to two decimal places. %<\/p>\n

d. What is the bond’s yield to call? Round your answer to two decimal places. %<\/p>\n

\u00a0<\/p>\n

The earnings, dividends, and common stock price of Shelby Inc. are expected to grow at 6% per year in the future. Shelby’s common stock sells for $20.75 per share, its last dividend was $1.50, and the company will pay a dividend of $1.59 at the end of the current year.<\/p>\n

a.Using the discounted cash flow approach, what is its cost of equity? Round your answer to two decimal places. %<\/p>\n

b. If the firm’s beta is 1.0, the risk-free rate is 5%, and the expected return on the market is 12%, then what would be the firm’s cost of equity based on the CAPM approach? Round your answer to two decimal places. %<\/p>\n

c.If the firm’s bonds earn a return of 11%, and analysts estimate the market risk premium is 3 to 5 percent, then what would be your estimate of rs using the over-own-bond-yield-plus-judgmental-risk-premium approach? Round your answer to two decimal places. (Hint: Use the midpoint of the risk premium range). %<\/p>\n

d.On the basis of the results of parts a through c, what would be your estimate of Shelby’s cost of equity? Assume Shelby values each approach equally. Round your answer to two decimal places<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

A 25-year, 8% semiannual coupon bond with a par value of $1,000 may be called in 4 years at a call price of $1,100. The bond sells for $950. (Assume that the bond has just been issued.) a. What is the bond’s yield to maturity? Round your answer to two decimal places. % b. What […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[31],"tags":[],"class_list":["post-10595","post","type-post","status-publish","format-standard","hentry","category-homework-help"],"_links":{"self":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/10595","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/comments?post=10595"}],"version-history":[{"count":0,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/10595\/revisions"}],"wp:attachment":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/media?parent=10595"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/categories?post=10595"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/tags?post=10595"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}