a)A bond that pays interest semiannually has a price of $985.72 and a semiannual

Question

a)A bond that pays interest semiannually has a price of $985.72 and a semiannual coupon payment of $25.75. If the par value is $1,000, what is the current yield?

2.61%

5.15%

5.22%

4.96%

2.58%

b)There is a zero coupon bond that sells for $331.08 and has a par value of $1,000. If the bond has 22 years to maturity, what is the yield to maturity? Assume semiannual compounding.

5.09%

4.88%

5.15%

4.96%

4.92%

c)A stock currently sells for $58. The dividend yield is 3.6 percent and the dividend growth rate is 4.9 percent. What is the amount of the dividend that was just paid?

$1.99

$1.89

$1.74

$2.09

$1.88

Explanation / Answer

(a) Par Value = $ 1000, Market Value = $ 985.72 and Semi-Annual Coupon = $ 25.75

Annual Coupon = 25.75 x 2 = $ 51.5

Current Yield = Annual Coupon / Market Price = 51.5 / 985.72 = 0.0522 or 5.22 % approximately

Hence, the correct option is (c).

NOTE: Please raise separate queries for solutions to the remaining questions.

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