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Unformatted text preview: formula MRP = (t – 1)*0.2%, where t = number of years to maturity. What is the default risk premium (DRP) on XYZ bonds? 3. Smith Corporation's bonds have a 15-year maturity, a 8% coupon (paid semiannually), and a par value of $1,000. The market interest rate (r d ) is 10%, based on semiannual compounding. What is the bond’s price? 4. The value of a 20 year zero coupon bond when the market required rate of return of 8% (semiannual) is: 5. An analyst believes that economic conditions during the next year will be either Strong, Normal, or Weak, and she thinks that the Jones Company's returns will have the following probability distribution. What's the Expected Return of Jones's stock? Conditions Probability Return Strong 25% 20% Normal 50 10 Weak 25 -10...
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- Fall '08
- XYZ Corporation, risk-free rate, Risk premium, XYZ bonds