3 million, which you invest in stocks with an average beta Lquired rate of retur

Question

3 million, which you invest in stocks with an average beta Lquired rate of return on the new portfolio? (Hint:You must first find the market risk premium, then find the new portfolio beta.) Do not round your intermediate a. 10.11%) b. 10.20% c. 7.75% @k.43% e. 9.36% 11. Kebt Corporation's Class Semi bonds have a 12-year maturity and an 8.50% coupon paid semiannually ( each 6 months), and those bonds sell at their $1,000 par value. The firm's Class Ann bonds have the sa maturity, nominal interest rate, and par value, but these bonds pay interest annually. Neither bond is cal what price should the annual payment bond sell? a. $986.86 b. $1,164.49 c. $957.25 d. $878.30 e. $907.91

Explanation / Answer

the effective coupon rate for annual bond is

=((1+(8.55%/2))^2)-1

=8.68%

now use pv formaule in excel to find the present value of bond

=pv(rate,npet,pmt,fv,type)

=pv(8.68%,12,(8.5%*1000),1000,0)

=986.86

It is option A

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