What is the yield to maturity

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Question - You are the junior financial manager at Caribbean Capital Market Limited and you have been asked to provide the calculations for the following scenarios to assist a client:

A. Fourth Generation Corporation issued a bond 2 years ago which had a maturity at that time of 15 years. Coupon payments are made semi-annually with an annual interest rate of 6%. If the face value of the bond is $1,000 calculate the value of the bond today which has a required rate of return of 7.5%.

B. The value of a bond today is $1,055 and matures in 12 years' time and a coupon rate of 10.5% paid annually. What is the yield to maturity when the par value of the bond is $1,000?

C. Fesco Limited ordinary stock currently trades at $8 per share on the Jamaica Stock Exchange and pay dividends today amounting to $1.36. Analysts anticipate that dividends will grow at a rate of 10% annually. Calculate the investors required rate of return on the stock.

Reference no: EM133188911

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