Question 2

A firm issues a bond today with a $1,000 face value, an 8% coupon interest rate, and a 25-year maturity. An investor purchases the bond for $1,000. PLEASE SHOW YOUR WORKS! EXCEL SHEET AND FINANACIAL CALCULATOR ARE NOT HELPFUL TO ME!!

(2.1) What is the yield to maturity (YTM)? Explain.

(2.2) Suppose the investor bought the bond described previously for $900. What is the YTM?

(2.3) Suppose the bond described previously has a price of $1,100 five years after it is issued. What is the YTM at that time?

(2.4) As always, the value of the stock is the ______________ of all the _______________. A stocks expected cash dividend divided by its current price is called ________________. Dividend payable on preferred stock are either _______________ or _______________. Usually, both the accumulated preferred dividends and the current preferred dividends must be paid before the ______________________ can receive anything.