Question: (25) 1. (A) Consider a company that issues a bond with a maturity of five years, a face value of $10,000, a coupon rate of
(25) 1. (A) Consider a company that issues a bond with a maturity of five years, a face value of $10,000, a coupon rate of 6(with semi-annual coupon payments). The annual yield of the bond is 4%. What is the price of the bond? (B) Consider a common stock with the following expected dividends: $4 in one year (i.e., at t=1) and $6 in two years (at t=2). After t=2, the dividends will grow at 5$ per year for three years (i.e., t=3, t=4, and t=5). After t=5, dividends will grow at 3% per year, forever. The opportunity cost of capital is 10%. What is the price of the common stock? (C) Consider the common stock described in part (A), above. You plan to purchase this common stock in two years (i.e., at t=2) AFTER the t-2 dividend has been paid. What is your expected purchase price at t=2? manaidering three nroiects: their associated
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