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Last year Clark Co. issued a 15-year, 12 percent semiannual coupon bond at its par value of $1,000. The bond can be called in 4 years at a price of $1,060. Now the bond sells for $975.
a. What is the bond’s nominal yield to maturity? What is its nominal yield to call?
b. If the market interest rate stays the same in the near future, would an investor be more likely to actually earn the YTM or the YTC? Explain your answer. (hint: the YTM obtained in part (a) indicates the current market interest rate)
c. Suppose the bond has been selling at a premium rather than at a discount. Would the YTM then have been the most likely actual return, or would the YTC have been most likely? Explain your answer.
Warr Corporation just paid a dividend of $3.5 a share (that is, D0 = $3.5). The dividend is expected to grow 7% a year for the next 3 years and then at 5% a year thereafter. What is the expected dividend per share for each of the next 5 years?
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A 10-year, 12 % semiannual coupon bond with a par value of $1,000 may be called in 4 years, at a call price of $1,060. The bond sells for $1,300. (Assume the bond has just been issued). What is the bond’s yields to maturity? What is the bond’s curren..
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Veggie Burgers, Inc., would like to maintain its cash account at a minimum level of $264,000 but expects the standard deviation in net daily cash flows to be $13,900, the effective annual rate on marketable securities to be 3.8 percent per year, and ..
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