a) Jon plc is listed on the London Stock Exchange. If, using the CAPM approach, Jon’s return on equity is 5% and risk premium is 3%. The beta is 0.7. What is the return on short dated government bonds? b) Calculate the yield to maturity of a £100 nominal value irredeemable bond with a coupon rate of 6% and a market value of £110. c) A 10-year corporate bond has 6 years remaining until redemption. The par value is £100 and it makes annual coupon payments. The coupon rate is 4%. The yield to maturity is 8%. Calculate the market price of the bond based on the above information. d) Briefly discuss the factors to be considered when a company decides to make rights issues?
a) Jon plc is listed on the London Stock Exchange. If, using the CAPM approach, Jon’s return on equity is 5% and risk premium is 3%. The beta is 0.7. What is the return on short dated government bonds? b) Calculate the yield to maturity of a £100 nominal value irredeemable bond with a coupon rate of 6% and a market value of £110. c) A 10-year corporate bond has 6 years remaining until redemption. The par value is £100 and it makes annual coupon payments. The coupon rate is 4%. The yield to maturity is 8%. Calculate the market price of the bond based on the above information. d) Briefly discuss the factors to be considered when a company decides to make rights issues?
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 13P
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a) Jon plc is listed on the London Stock Exchange. If, using the
b) Calculate the yield to maturity of a £100 nominal value irredeemable bond with a coupon rate of 6% and a market value of £110.
c) A 10-year corporate bond has 6 years remaining until redemption. The par value is £100 and it makes annual coupon payments. The coupon rate is 4%. The yield to maturity is 8%. Calculate the market price of the bond based on the above information.
d) Briefly discuss the factors to be considered when a company decides to make rights issues?
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