Question

(a) The face value of the bond is Rs. 50,000/- issued for eight years with a coupon rate of 6.5%. Calculate the price of the bond if market yield remains the same, if yield goes up by 7% and if yield decreases to 5.5%. What is the relationship between yield and price of the bond, explain it graphically?

(b) You buy a share today at Rs. 100/-, and after a year its price jumps to Rs. 108/-. The current yield of the bond is 15%, calculate the dividend and dividend yield of the share. What is the difference between capital gain and dividend yield?

Answer 1

a)

b)A capital gain is the difference between the purchase price and the value of the security when you sell.

A dividend is a payout to shareholders from the profits of a company that is authorized and declared by the board of directors.

In the question, the authorized dividennd is not mentined and herefore we cannot calculate the dividend yiled also.