Question

1) Dob Co has a Beta of 1.32 at a time when the expected market return is 8.7% and the risk free rate is 2.2%. What is Dob Co's expected return?

(Enter your response as a percentage with two decimal places, ex: 12.34).

2) If the market risk premium is 11%, the risk-free rate is 3.8%, and Nate Corp has a beta of 2.03, what is the required return for Nate Corp?

(Enter your response as a percentage with two decimal places, ex: 12.34)

3) What is the price of bond paying a coupon rate of 4.5% that has a par value of $1000, and has 7 years to maturity with a Yield to Maturity of 2.3%?

(Enter the absolute value of your response to two decimal places, ex: 123.45 NOT -123.45)

4) What is the yield to maturity for a bond with 12 years to maturity, a coupon rate of 4.5% making payments semi-annually, a face value of $1000 if it currently sells for $957?

(Enter your response as a percentage with two decimal places, ex: 12.34)

Please get me the answer for all the 4 question please.. please please

Answer 1

1

As per CAPM

expected return = risk-free rate + beta * (expected return on the market - risk-free rate)

Expected return% = 2.2 + 1.32 * (8.7 - 2.2)

Expected return% = 10.78

2

As per CAPM

expected return = risk-free rate + beta * (Market risk premium)

Expected return% = 3.8 + 2.03 * (11)

Expected return% = 26.13

3

K = N

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N

k=1

K =7

Bond Price =∑ [(4.5*1000/100)/(1 + 2.3/100)^k]     +   1000/(1 + 2.3/100)^7

k=1

Bond Price = 1140.76

4

K = Nx2

Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2

k=1

K =12x2

957 =∑ [(4.5*1000/200)/(1 + YTM/200)^k]     +   1000/(1 + YTM/200)^12x2

k=1

YTM% = 4.98