Two parts please review
Part 1
Show all calculations - you can't receive partial credit if I don't know how you tried to solve the problem.
1. 1a. Compute the price of a 3.75 percent coupon bond with 18 years left to maturity and a market interest rate of 4.5 percent. (Assume interest payments are semiannual.)
1b. Is this a discount or premium bond?
1. 2. A 4.25 percent coupon bond with 13 years left to maturity is offered for sale at $1,075. What yield to maturity is the bond offering? (Assume interest payments are semiannual.)
1. 3. Financial analysts forecast Company A's growth rate for the future to be 5 percent. The most recent dividend was $0.78. What is the value of Company A stock when the required return is 8 percent?
1. 4. Company B recently paid a $0.64 dividend. The dividend is expected to grow at a 7 percent rate. At a current stock price of $54, what is the return shareholders are expecting?
1. 5. Consider the following annual stock returns for the Ace Company and the King Company.
Compute each stock's average return, standard deviation, and coefficient of variation.
What do these calculations tell us about the comparison of risk and return between the two companies?
|
year
|
Ace
|
King
|
|
1
|
22.25%
|
-6.25%
|
|
2
|
-18.00%
|
16.50%
|
|
3
|
21.50%
|
7.25%
|
|
4
|
45.00%
|
36.50%
|
|
5
|
-14.50%
|
-12.50%
|
Comparison of risk and return
Average return,
Standard deviation,
Coefficient of variation
Part 2
Create a 750-900 word report, and include the following:
• Explain the relationship between risk and return
• Identify an example of risk and return.
• Explain which is more risky bonds or common stocks.
• Explain how understanding risk and return will help you in future business ventures.
Format your assignment consistent with APA guidelines.