James owns investment A and $1$ bond B$.$ The total value of his holdings is $$2,950\mathrm{.}00.$ Bond B has a coupon rate of $7\mathrm{.}51$ percent, par value of $$1,000\mathrm{.}00,$ YTM of $8\mathrm{.}02$ percent, $11$ years until maturity, and semi$-$annual coupons with the next coupon due in $6$ months. Investment A is expected to pay annual cash flows to James of $$x per year forever with the first annual cash flow expected in $1$ year from today. The expected return for investment $$A is $8\mathrm{.}58$ percent. What is $x,$ the fixed annual cash flow that will be paid forever by investment A$?$

Answer rating: 100% (QA)

Approach Calculate the price of bond B We can use the zerocoupon bond formula since we know the bond... View the full answer