a) An 8-year coupon bond has a face value of 2,000 and carries an annual coupon...
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a) An 8-year coupon bond has a face value of 2,000 and carries an annual coupon of 150 paid at the end of each year. Assume a market interest rate of 5.5% per year. Calculate the current value of the bond. [7 marks] b) Calculate the current value of a "zero coupon" bond that has a face value of 5,000 and a maturity date of 12 years, assuming a market interest rate of 4.5% per year. [5 marks] c) Company "GLD plc" will pay a dividend of 1.5 per share in one year from now on. The company expects that the growth rate will be 4% per year forever. Calculate the value of one share of the company assuming a discount rate of 10% per year. [8 marks] a) An 8-year coupon bond has a face value of 2,000 and carries an annual coupon of 150 paid at the end of each year. Assume a market interest rate of 5.5% per year. Calculate the current value of the bond. [7 marks] b) Calculate the current value of a "zero coupon" bond that has a face value of 5,000 and a maturity date of 12 years, assuming a market interest rate of 4.5% per year. [5 marks] c) Company "GLD plc" will pay a dividend of 1.5 per share in one year from now on. The company expects that the growth rate will be 4% per year forever. Calculate the value of one share of the company assuming a discount rate of 10% per year. [8 marks]
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