Calculate the interest rate:

1.Sara paid $800 for a zero-coupon bond with a face value of $1,000 that will mature in exactly a year. What interest rate did Sara pay?

Calculate the Yield to Maturity:

2.What is the yield of maturity of a ground rent that pays $65 per year and that currently sells for $700?

Please use The One-Period Valuation Model:

Formula: P=E/(1+k)+P/(1+k)

1.If firm is expected to pay no dividends, its share price is expected to be $95 at the end of the year, and therequired rate of return (or k)on investments in its risk class is 16%, an investor would buy the stock if its market price was at or below what price?

2.A different investor may require a 17% return to hold the stock and think $100 is a reasonable price a year from now, but he might also think earnings of $3 per share is in the offering. How much would he pay per share?

Answer rating: 100% (QA)

1 To calculate the interest rate for the zerocoupon bond we can use the formula for present value P ... View the full answer