**Compute the bond’s expected**

**rate of return.**

Course Principles of Finance, course text Foundations of Finance

(Keown, Martin & Petty)

Bonds and Common Stocks

Complete Study Problem 7-10 from the end of Chapter 7 and Study

Problem 8-16 from the end of Chapter 8 and postyour answers to the

discussion board. Remember to complete all parts of the problems

and report the results of your analysis. Since the values will be

less than $10,000, show the values rounded to the penny. Show

all percentages to two decimal places as percentages. Do not

forget to show the necessary steps and explain how your attained

that outcome. Respond to at least two of your classmates’

postings.

7-10.(Bond valuation) National Steel

15-year, $1,000 par value bonds pay 8 percent interest annually.

The market price of the bonds is $1,085, and your required rate of

return is 10 percent.

a. Compute the bond’s expected

rate of return.

b. Determine the value of the bond

to you, given your required rate of return.

c. Should you purchase the bond?

8-16. (Common stock valuation) The

common stock of NCP paid $1.32 in dividends last year. Dividends

are expected to grow at an 8 percent annual rate for an indefinite

number of years.

a. If NCP’s current market price

is $23.50 per share, what is the stock’s expected rate of

return?

b. If your required rate of return

is 10.5 percent, what is the value of the stock for you?

c. Should you make the

investment?

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