a) ASD Co. issued an 8% coupon (paid annually) 20 year bond twenty years ago (t=0)....

 

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a) ASD Co. issued an 8% coupon (paid annually) 20 year bond twenty years ago (t=0). The company had issued the bond at par. For the first five years after the issue, the interest rate remained the same as that the issue date. For the next five years, the appropriate interest rate was 7%. In the subsequent five years, the interest rate rose to 11 percent, and in the last five years of the bond, the interest rate were at 9%. Compute the price of the bond at (a)t=4; (b) t=6; (c) t=13 b) The common stock of Ert Co. is expected to pay a dividend of $2.50 per share next year. The dividend is expected to grow at the rate of 3% per year forever. If the appropriate discount rate is 10%, what should be the price of stock? a) ASD Co. issued an 8% coupon (paid annually) 20 year bond twenty years ago (t=0). The company had issued the bond at par. For the first five years after the issue, the interest rate remained the same as that the issue date. For the next five years, the appropriate interest rate was 7%. In the subsequent five years, the interest rate rose to 11 percent, and in the last five years of the bond, the interest rate were at 9%. Compute the price of the bond at (a)t=4; (b) t=6; (c) t=13 b) The common stock of Ert Co. is expected to pay a dividend of $2.50 per share next year. The dividend is expected to grow at the rate of 3% per year forever. If the appropriate discount rate is 10%, what should be the price of stock?

Answer rating: 100% (QA)

Assume par value of bond 100 Whenever interest rate coupon rate then bond is trading at par Aa Durin... View the full answer