Calculate the yield to maturity-current yield

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1) Calculate the yield to maturity, current yield, and capital gains yield for a 12% coupon bond, with semi-annual coupons, face value of $1,000, 15 years to maturity, and a price of $1,110.

Yield to Maturity:

Current Yield:

Capital Gains Yield:

2) Smith Company recently issued a bond with semi-annual compounding, The price of the bond today is $985 and the market interest rate on bonds of similar risk is 7%. The bond matures in 8 years. What is the coupon rate (expressed in annual terms).

3) ABC Company plans on increasing its annual dividend by 6% percent, 5%, and 4% at the end of the next three years. After that, growth is expected to slow to a constant rate of 2% per year. The company just paid its annual dividend in the amount of $3.00 per share. What is the current value of one share of this stock if the required rate of return is 12 percent?

4) Martin, Inc. is considering a project that costs $500 and returns $225 per year for 3 years. The cost of capital for Martin is 8%. What is the Profitability Index for this project? Should the project be accepted? Explain.

Reference no: EM132477708

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