What is the expected return for given investment

Reference no: EM131965283

Question: Cy owns investment A and 1 bond B. The total value of his holdings is 1,844 dollars. Bond B has a coupon rate of 7.5 percent, par value of $1000, YTM of 5.74 percent, 7 years until maturity, and semi-annual coupons with the next coupon due in 6 months. Investment A is expected to produce annual cash flows forever. The next cash flow is expected to be 88.47 dollars in 1 year, and subsequent annual cash flows are expected to increase by 1.85 percent each year forever. What is the expected return for investment A? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098

Reference no: EM131965283

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