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Category > Accounting Posted 29 May 2017 My Price 14.00

Risk, Return, and Their Relationship

Question description

 

Hello Shirley,

Can you help me check this week's homework? I've completed the homework. I just need help to make sure there is no mistake. Thanks.

7-21 Compute Bond Price Compute the price of a 3.8 percent coupon bond with 15 years left to maturity and a market interest rate of 6.8 percent. (Assume interest payments are semiannual.) Is this a discount or premium bond? (LG7-4)  
  Maturity 15                            
  Coupon Rate 3.80%                            
  Yield to Maturity 6.80%                            
  Number of coupons 2                            
  Per Value  $    1,000.00                            
                                 
  Bond Value $720.63                            
  The answer is lower than the 940, so it is not a premium bond.                         
                                 
7-27 Yield to Maturity A 5.65 percent coupon bond with 18 years left to maturity is offered for sale at $1,035.25. What yield to maturity is the bond offering? (Assume interest payments are semiannual.) (LG7-6)      
  Maturity 18                            
  Coupon Rate 5.65%                            
  Yield to Maturity 0                            
  Number of coupons 2                            
  Per Value  $    1,000.00                            
                                 
  Bond Value  $    1,035.25                            
  Bond Price  $       323.52                            
  Computed Price $2,017.00                            
                                 
  Current Yield 17.46%                            
                                 
8-19   Value a Constant Growth Stock Financial analysts forecast Safeco Corp.’s (SAF) growth rate for                       
the future to be 8 percent. Safeco’s recent dividend was $0.88. What is the value of Safeco stock                      
 when the required return is 12 percent? (LG8-5)                              
                                 
  growth = 8%                            
  D0 = 0.88                            
  R = 12%                            
                                 
  P0 = 23.76                            
                                 
8-21   Expected Return Ecolap Inc. (ECL) recently paid a $0.46 dividend. The dividend is expected to                       
grow at a 14.5 percent rate. At a current stock price of $44.12, what is the return shareholders are                       
expecting? (LG8-5)                              
                                 
  g = 14.50%                            
  d0 = 0.46                            
  P0 = 44.12                            
                                 
  Return = 15.69%                            
                                 
                                 
9-33  Risk, Return, and Their Relationship Consider the following annual returns of Estee Lauder and                      
 Lowe’s Companies:                              
                                 
Compute each stock’s average return, standard deviation, and coefficient of variation. Which stock                       
appears better? Why? (LG9-3, LG9-4)                              
 
                 
  Year Estee Lauder Lowe's                          
  1 23.40% -6%                          
  2 -26% 16.10%                          
  3 17.60% 4.20%                          
  4 49.90% 48%                          
  5 -16.80% -19%                          
                                 
  Average return 9.62% 8.66%                          
  Standard deviation 31.00% 25.51%                          
                                 
  Coefficienct 3.22 2.95                          
                                 
  Estee Lauder's stock is better.                               

 

Answers

QuickHelper
(10)
Status NEW Posted 29 May 2017 06:05 PM My Price 14.00

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