What will the bond sell for today

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Question - Financial Management Application of Time Value of Money - You are a financial analyst at a prominent financial institution. Your clients have different investment concerns and requires your advice in the following questions.

1. Forrest Co. issued 11-year bonds 1 year ago at a coupon rate of 8.5%. The bond makes semi-annual payments. If the required rate of return of an investor on these bonds is 6%, what will the bond sell for today?

2. JMMB issued 10-year bonds with a coupon rate of 8%. The bond makes semiannual payments. If these bonds currently sell for 87 percent of par value. What is the YTM?

3. John Brown is interesting in investing in stocks. Please assist him in calculating the following:

a. GraceKennedy issued 8 % - $300 000 preference shares at par 9 years ago. These shares are now valued $395 000. What are the investors required rate of return for these preference shares?

b. John Brown is contemplating the purchase of BNS ordinary shares at the beginning of the year. The dividend is expected to be $2.20 and the market price at the end of the year is projected to be $50. If the investors' required rate of return is 20%, what is the value of the security?

Reference no: EM132976578

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