Unless otherwise stated, answer in complete sentences, and be sure to use correct English, spelling, and grammar.
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%.
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 4 years. If you have a required rate of return of 13%, plan to hold the stock for 4 years, and are confident that it will sell for $30 at the end of 4 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 State | Return on A in State | Return on B in State | Return on C in 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 |
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