Business Question

1. Complete problem: Yield to Maturity for Annual PaymentsXYZ Corporation’s bonds have 14 years remaining to maturity. Interest is paid
annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%.
The bonds sell at a price of $950.
o
What is their yield to maturity? Show your work.
2. Complete problem: Required Rate of Return
Show your work.
Suppose rRF = 5%, rM = 10%, and rA = 12%.
o
o
Calculate Stock A’s beta.
If Stock A’s beta were 2.0, then what would be A’s new required rate of
return?
3. Complete problem: Portfolio Beta
You have a $2 million portfolio consisting of a $100,000 investment in each of 20
different stocks. The portfolio has a beta of 1.1. You are considering selling
$100,000 worth of one stock with a beta of 0.9 and using the proceeds to purchase
another stock with a beta of 1.4.
o
What will the portfolio’s new beta be after these transactions? Show your
work.
Prepare this Assignment as a Word® document. List each question, followed by your
answer.