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Holding Period Return Collapse You buy a 7% annual coupon bond for $875 today. The bond has 10 years till maturity.
A. What rate of return do you 'expect' to earn on your bond investment?
B. Two years from now, the YTM on your bond has declined by 1% due to credit rating improvement or market interest rate changes.
If you decide to sell the bond, what price will your bond sell for? What is the holding period return on your investment?
Compare this HPR with the YTM from part A.
Kingston, Inc. management is considering purchasing a new machine at a cost of $4,408,526. They expect this equipment to produce cash flows of $757,564, $830,902, $1,026,664, $1,059,322, $1,217,327, and $1,289,435 over the next six years.
The current price of a stock is $16. In 6 months, the price will be either $18 or $13. The annual risk-free rate is 4%. Find the price of a call option on the stock that has an strike price of $14 and that expires in 6 months.
What is the current price of the bond if the comparable rate of interest is 8 percent?
1. What is law and why is it necessary? 2. Explain the difference between the following pairs:
You own a portfolio that has $2,300 invested in Stock A and $3,300 invested in Stock B. If the expected returns on these stocks are 8 percent and 11 percent, respectively, what is the expected return on the portfolio?
Which of the following tends to reduce industry profitability?
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