Assuming the yield to maturity remains constant

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Reference no: EM132018106

1. Suppose that General Motors Acceptance Corporation issued a bond with 10 years until? maturity, a face value of $1,000?,

and a coupon rate of 7.8% ?(annual payments). The yield to maturity on this bond when it was issued was 6.1%.

Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment?

Before the first coupon? payment, the price of the bond is ?

2. A company just paid $4.33 to its shareholders as the annual dividend. This dividend will increase by 4 percent forever. If you require a 11 percent rate of return, how much are you willing to pay to purchase one share of this stock?

$10.55

$41.84

$64.33

$77.82

Reference no: EM132018106

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