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Please answer ALL OF QUESTIONS 1 AND 2A and 2B
1. Stock R has a beta of 1.2, Stock S has a beta of 0.35, the required return on an average stock is 9%, and the risk-free rate of return is 5%. By how much does the required return on the riskier stock exceed the required return on the less risky stock? Round your answer to two decimal places.
2. Harrimon Industries bonds have 6 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 8%.
a. What is the yield to maturity at a current market price of:
$759? Round your answer to two decimal places. ________%
$1,083? Round your answer to two decimal places. _________%
b. Would you pay $759 for each bond if you thought that a "fair" market interest rate for such bonds was 13%-that is, if rd = 13%?
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