Question

Q4

5.What is the price of a zero-coupon 24-year maturity bond per face (par) value of $1,000 if the annual market rates for these bonds are 5.9%? Answer to the nearest cent, xxx.xx and enter without the dollar sign.

6.A firm's stock has 50% chance of a 8% rate of return and
a 50% chance of a 23% rate of return. What is the
**standard deviation** of return for this stock?
Answer as a **percent** return to the
nearest hundredth of a percent as in xx.xx without entering a
percent symbol.

Answer #1

5) Price of zero coupon bond:

M = Face/Par value = 1,000

r = rate of interest = 5.9%

n= number of years until maturity = 24 years

Price of zero coupon bond = M/(1+r)^n

= 1,000/(1+0.059)^24

= 1,000/(1.059)^24

= 1,000/3.958

= 252.65

Price of zero coupon bond = 252.65 (without dollar sign)

6) Calculation of Expected return

Stock | Probability (1) | Return (2) | Expected return (3) (1*2) |

A | 0.5 | 8% | 4% |

B | 0.5 | 23% | 11.5% |

Expected return | 15.5% |

Calculation of standard deviation of stock:

Probability (1) | Return-Expected return (2) | Square of Return-Expected return (3) | Variance (4) (1*3) |

0.5 | 8%-15.5%=-7.5% or -0.075 | (-0.075)^2 = 0.0056 | 0.0028 |

0.5 | 23%-15.5%= 7.5% or 0.075 | (0.075)^2 = 0.0056 | 0.0028 |

Variance | 0.0056 |

Standard deviation = Square root of Variance

= Square root of 0.0056

= 0.0748 or 7.48 (without percentage symbol)

Standard deviation of stock = 7.48

MT
5) If someone will pay you 100 dollars in 19 years and interest
rate is estimated to be 7.2% over those years, what is the
estimated value of that cash flow? Provide answer to the nearest
cent, xxx.xx, and enter without a dollar sign.
6)A firm's stock has 50% chance of a 8% rate of return and
a 50% chance of a 27% rate of return. What is the
standard deviation of return for this stock?
Answer as a percent...

A firm's stock has 50% chance of a 9% rate of return and a 50%
chance of a 27% rate of return. What is the standard deviation of
return for this stock? Answer as a percent return to the nearest
hundredth of a percent as in xx.xx without entering a percent
symbol.

What is the price of a 5-year bond paying an annual coupon rate
of 9.4%, but paying it semiannually, per face (par) value of $1,000
if the annual market rates for these bonds are
12.2%? Answer to the nearest cent, xxx.xx and
enter without the dollar sign.

Q4
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that include annual payments,9 year loan, and interest rate of 4.5
per year. How much of the first year's payment would be applied
toward reducing the principal? Answer to the nearest cent xxx.xx,
and do not enter the dollar sign.
10.What is the effective or equivalent annual rate if the bank
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A zero is priced at $589. It has 8 years to the maturity. What
is the yield to maturity of this bond? Round to the nearest
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(For example, if your answer is 5.67%, type 5.67 without %
sign)
What is the price of a $1,000 par value bond with an 8% coupon
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are 12.1%? Answer to the nearest cent, xxx.xx
What is the price of a 12-year bond paying 8.2% annual coupons with
a face (par) value of $1,000 if the market rates for these bonds
are 11.6%? Answer to the nearest cent, xxx.xx

Q6
3.What would be the component cost of debt estimated from a ten
year bond bond with face value of $1,000 and selling for $1,000
with annual coupons of 14% paid annually and with a tax rate of
36%? Answer as a percentage to the nearest hundredth as in xx.xx
and without the percentage sign.
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