Answer:
(a) Dollar price of the bond = Par value × Current price percentage
= $1,000 × 106.124%
= $1,061.24
(b) Bond's current yield:
Annual interest paid in dollars = Bond par value × Rate of interest
= $1,000 × 7.8%
= $78
= 0.0734
= 7.34%
(c) Issue price of bond is $1,000 and current maturity price is $1,061.24. Thus, bond price is greater than the par value.
(d) Current yield is the return on bond at current price. Yield to maturity is 6.588 % and current yield is 7.34%. Since the current price is more than the par value, therefore, YTM is lower than the current yield.
If you look at it I think it was be in bounds and you did not have
= (9-5)
When you hit enter, it will give you the value of 4.
Answer:
Cost of equity capital can be found by the Capital asset pricing model:
Cost of capital
= Risk free rate + beta * market premium
= 2% + 0.8 * 10%
= 10%
Weighted Average Cost of Capital:
= (weight of debt * after tax cost of debt) + (weight of stock * cost of stock)
= (50% * 8% * ( 1 - 34%)) + (50% * 10%)
= 10.28%
Answer:
D. varying risk premiums
Explanation:
Fama and French has a total of three factors considered in the study:
Size of firms, book to market values, and the additional return on the market.
For all these market anomalies the study is based on the varying risk premiums assigned.
As for the market efficiency the out performance is explained by the risk and value that is of small stocks due to high cost of capital associated, and with that there is great business risk also associated.
