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What is the value of ordinary share

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This question consists of sub-questions, (a) and (b), answer both.

(a) You hold a bond with a coupon interest rate of 8.00% and a face (par) value of $10,000. If the maturity date is 4 years and the market's required yield to maturity for similar rated debt is 6.00%, what is the value of this bond?

(b) An ordinary share pays a $2.00 dividend at the end of last year and is expected to pay a cash dividend every year from now to infinity. Each year, the dividends are expected to grow at a rate of 5.00%. Based on an assessment of the riskiness of the ordinary shares, the investor's required rate of return is 12.00%. What is the value of this ordinary share?

Reference no: EM132673309

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