1. ExxonMobile 15 years bond pays a semiannual coupon payment of $35, if the current yield to maturity of the bond is 10% annually then what would be market price of the bond? Explain what will happen to bond price if the current yield to maturity of the bond increases by 100 basis points? Explain what will happen to bond value if the bond matures in 10 years instead of 15 years? 2. Answer following questions based on the information provided in the table below: Stocks Investment Beta A 40,000 1.2 B 60,000 0.75 C 20,000 -0.5 D 100,000 1.0 a.If the market risk premium is 8% and the risk free rate is 8%, estimate the required rate of return for each of the stocks. (3.0 points) b. What is the portfolio beta? (1.0 point) c. What is the required rate of return on the portfolio? 3.GE has a bond outstanding with 10 years to mature and callable in 6 years. The coupon rate of this bond is 9% paid semi-annually. The call price of the bond is 109% of the face value and the current market price of the bond is $950. Find the yield to maturity (YTM) and yield to call (YTC) of this bond. Do you think GE should call this bond? (2.0+2.0+1.0 = 5 points) 4.You intend to purchase IBM Stock at $ 60 per share, hold it 1 year, and then sell it after a dividend of $3 is paid. IBM has a beta of 0.9, the required rate of return on market portfolio is 10% and the risk free rate is 6%.How much will the stock price have to appreciate next year? (5 points),Can you show me how to get the answers step by step and which formulas to use?
Paper#2626 | Written in 18-Jul-2015Price : $25