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What is the expected return of SARs shares

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Reference no: EM132959905

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Q1. Suppose a ten-year, $1,000 bond with an 8.4% coupon rate and semiannual coupons is trading for $1,034.12.

a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)?

b. If the bond's yield to maturity changes to 9.7% APR, what will be the bond's price?

Q2. SAR company's ordinary shares are expected to pay $ 2.5 per share in dividends in 4 years and after which the dividends are expected to grow at 1% annually forever. Company ABC's shares have a beta of 1.3. The long-term return of ASX200 is 9.1% and the return of T-bonds is 4.3%.

a. What is the expected return of SAR's shares according to the CAPM?

b. What is the implied price per share?

Reference no: EM132959905

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