Assignment
Instructions
Directions: Be sure to make an electronic copy of your answer before submitting it to Ashworth College for grading. Unless otherwise stated, answer in complete sentences, and be sure to use correct English spelling and grammar. Sources must be cited in APA format. Your response should be four pages in length; refer to the "Assignment Format" page for specific format requirements.
Part A: Moore Company is about to issue a bond with semiannual coupon payments, a coupon rate of 8%, and par value of $1,000. The yield-to-maturity for this bond is 10%.
a. What is the price of the bond if the bond matures in 5, 10, 15, or 20 years?
b. What do you notice about the price of the bond in relationship to the maturity of the bond?
Part B: The Crescent Corporation just paid a dividend of $2 per share and is expected to continue paying the same amount each year for the next four years. If you have a required rate of return of 13%, plan to hold the stock for four years, and are confident that it will sell for $30 at the end of four years, how much should you offer to buy it at today?
Part C: Use the information in the following table to answer the questions below:
|
State of Economy
|
Probability of State
|
Return on A in State
|
Return on B in State
|
Return on C in State
|
|
Boom
|
.35
|
0.040
|
0.210
|
0.300
|
|
Normal
|
.50
|
0.040
|
0.080
|
0.200
|
|
Recession
|
.15
|
0.040
|
-0.010
|
-0.260
|
a. What is the expected return of each asset?
b. What is the variance of each asset?
c. What is the standard deviation of each asset?
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.