True of the yield to maturity for bond

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Reference no: EM131968544

1. Which of the following statements is true of the yield to maturity for a bond?

The yield to maturity for a bond that sells at its par value is equal to the present value of interest payments received from the bond.

The yield to maturity for a bond that sells at its par value entirely comprises an interest yield and has a zero expected capital gains yield.

The yield to maturity for a bond that sells at its par value comprises a capital gains yield equal to the face value of the bond.

The yield to maturity for a bond that sells at its par value comprises an interest yield equal to the capital yield on the bond.

The yield to maturity for a bond that sells at its par value is equal to the future value of interest payments received from the bond.

2. A firm that has a debt (to assets) ratio of 0.5 has bonds with a YTM of 12%, equity investors who require an 18% return, and an effective corporate income tax rate of 34%. What is its cost of capital?

3. A firm’s capitalization rate is 22%, while the firm invests in projects with ROE of 20%.The growth in the firm is described by this relationship:The firm’s year-end dividend will be $2 per share, while EPS is $5. What is the PV of growth opportunities?

Reference no: EM131968544

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