a) Jon plc is listed on the London Stock Exchange. If, using the CAPM approach, Jon’s return on equity is 5% and risk premium is 3%. The beta is 0.7. What is the return on short dated government bonds?

b) Calculate the yield to maturity of a £100 nominal value irredeemable bond with a coupon rate of 6% and a market value of £110.

c) A 10-year corporate bond has 6 years remaining until redemption. The par value is £100 and it makes annual coupon payments. The coupon rate is 4%. The yield to maturity is 8%. Calculate the market price of the bond based on the above information.

d) Briefly discuss the factors to be considered when a company decides to make rights issues?

Answer rating: 100% (QA)

a Return on short dated government bonds The return on short dated government bonds is the riskfree rate of return In the CAPM approach the riskfree rate is subtracted from the expected return on the ... View the full answer