a) A stock costs $900 and pays an annual $40 cash dividend. If you expect to sell

Question:

a) A stock costs $900 and pays an annual $40 cash dividend. If you expect to sell the stock for $1,000 after five years, what is your anticipated return on the investment?

b) A $1,000 bond has a 4 percent coupon and currently sells for $900. The bond matures after five years. What is the bond’s anticipated return?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...