Accounting Question

Directions: Be sure to make an electronic copy of your answer before submitting it to Ashworth College for grading. Unless
otherwise stated, answer in complete sentences, and be sure to use correct English spelling and grammar. Sources must be
cited in APA format. Your response should be four (4) pages in length; refer to the “Assignment Format” page for specific
format requirements.
Respond to the items below.
Part A: Moore Company is about to issue a bond with semiannual coupon payments, a coupon rate of 8%, and par value of
$1,000. The yield-to-maturity for this bond is 10%.
a. What is the price of the bond if the bond matures in 5, 10, 15, or 20 years?
b. What do you notice about the price of the bond in relationship to the maturity of the bond?
Part B: The Crescent Corporation just paid a dividend of $2 per share and is expected to continue paying the same amount
each year for the next four years. If you have a required rate of return of 13%, plan to hold the stock for four years, and are
confident that it will sell for $30 at the end of four years, how much should you offer to buy it at today?
Part C: Use the information in the following table to answer the questions below:
State of
Economy
Probability of Return on A
State
in State
Return on B in Return on C in
State
State
Boom
.35
0.040
0.210
0.300
Normal
.50
0.040
0.080
0.200
Recession
.15
0.040
-0.010
-0.260
a. What is the expected return of each asset?
b. What is the variance of each asset?
c. What is the standard deviation of each asset?
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Rubric Name: Assignment 8 Rubric
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Criteria
Exemplary
Satisfactory
Unsatisfactory
Unacceptable
Part A – (a.) Bond
prices and maturity
dates – 5 years
10 points
7 points
4 points
0 points
The student accurately calculates The student mostly accurately
The student partially or incorrectly
the price of the bond if it
calculates the price of the bond if it calculates the price of the bond if it
matures in 5 years.
matures in 5 years.
matures in 5 years.
The student did not calcula
price of the bond if it matu
years.
Part A – (a.) Bond
prices and maturity
dates – 10 years
10 points
0 points
7 points
4 points
The student accurately calculates The student mostly accurately
The student partially or incorrectly
the price of the bond if it
calculates the price of the bond if it calculates the price of the bond if it
matures in 10 years.
matures in 10 years.
matures in 10 years.
The student did not calcula
price of the bond if it matu
10 years.
Criteria
Exemplary
Satisfactory
Unsatisfactory
Unacceptable
Part A – (a.) Bond
prices and maturity
dates – 15 years
10 points
7 points
4 points
0 points
The student accurately calculates The student mostly accurately
The student partially or incorrectly
the price of the bond if it
calculates the price of the bond if it calculates the price of the bond if it
matures in 15 years.
matures in 15 years.
matures in 15 years.
The student did not calcula
price of the bond if it matu
15 years.
Part A – (a.) Bond
prices and maturity
dates – 20 years
10 points
0 points
7 points
4 points
The student accurately calculates The student mostly accurately
The student partially or incorrectly
the price of the bond if it
calculates the price of the bond if it calculates the price of the bond if it
matures in 20 years.
matures in 20 years.
matures in 20 years.
Part A – (b.) Bond
10 points
prices in relationship
The student accurately explains
to maturity
the price of the bond in
relationship to the maturity of
the bond.
The student did not calcula
price of the bond if it matu
20 years.
7 points
4 points
0 points
The student mostly accurately
explains the price of the bond in
relationship to the maturity of the
bond.
The student partially or incorrectly
explains the price of the bond in
relationship to the maturity of the
bond.
The student did not explain
price of the bond in relation
to the maturity of the bond
Criteria
Exemplary
Satisfactory
Unsatisfactory
Unacceptable
Part B – Stock Price
Offer
20 points
15 points
10 points
0 points
The student accurately calculates The student mostly accurately
The student partially or incorrectly
how much he/she should offer to calculates how much he/she should calculates how much he/she should
buy the stock.
offer to buy the stock.
offer to buy the stock.
The student did not calcula
much he/she should offer t
the stock.
Part C – (a.) Expected 10 points
7 points
Return
The student accurately calculates The student mostly accurately
the expected return of each
calculates the expected return of
asset.
each asset.
4 points
Part C – (b.) Variance
4 points
0 points
The student partially or incorrectly
calculates the variance of each asset.
The student did not calcula
variance of each asset.
10 points
7 points
The student accurately calculates The student mostly accurately
the variance of each asset.
calculates the variance of each
asset.
0 points
The student partially or incorrectly
The student did not calcula
calculates the expected return of each expected return of each ass
asset.
Criteria
Exemplary
Satisfactory
Unsatisfactory
Unacceptable
Part C – (c.) Standard
Deviation
10 points
7 points
4 points
0 points
The student accurately calculates The student mostly accurately
The student partially or incorrectly
the standard deviation of each
calculates the standard deviation of calculates the standard deviation of
asset.
each asset.
each asset.
Total
Score of Assignment 8 Rubric,
/ 100
The student did not calcula
standard deviation of each