Difference between expected return and realized return

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1. A General Co. bond has a 7 percent coupon and pays interest semi-annually. The face value is $1,000 and the bond is selling at 102.05% of par. The bond matures in 15 years. The corporation's ac rate is 34%. What is the company's after-tax cost of debt?

2. What is the difference between expected return and realized return? Which one is directly relevant for investment decision? What is the the risk premium?

3. A stock will pay dividends of $3, $5, and $10 over the next three years, and then increase dividends at a rate of 6% afterwards. Its required rate of return is 20%. What is the value of the stock?

Reference no: EM131868054

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