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Abner Corporation’s bonds mature in 19 years and pay 9 percent interest annually. If you purchase the bonds for $1,300, what is your yield to maturity?
Fingen’s 11-year, $1, 000 par value bonds pay 8 percent interest annually. The market price of the bonds is $1,050 and the market’s required yield to maturity on a comparable-risk bond is 9 percent.
a. Compute the bond’s yield to maturity.
b. Determine the value of the bond to you, given your required rate of return.
c. Should you purchase the bond?
Last year you sold short 400 shares of stock selling at $107.55 per share. Six months later the stock had fallen to $43.48 per share. Over the six-month period the company paid out two dividends of $1.73 per share. Your total commission cost for selling and buying the shares came to $163. Determine your profit or loss from these transactions.
Your profit (or loss) from these transactions is $ ________ (Round to the nearest dollar.)
After reading this chapter, it isn’t surprising that you’re becoming an investment wizard. With your newfound expertise you purchase 100 shares of KSU Corporation for $40.66 per share. Over the next 12 months assume the price goes up to $ 47.47 per share, and you receive a qualified dividend of $0.66 per share. What would be your total return on your KSU Corporation investment? Assuming you continue to hold the stock, calculate your after-tax return. How is your realized after-tax return different if you sell the stock? In both cases assume you are in the 25 percent federal marginal tax bracket and 15 percent long-term capital gains and qualified dividends tax bracket and there is no state income tax on investment income.
Your total rate of return on your KSU Corporation investment is _______ %. (Round to two decimal places.)
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