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Unformatted text preview: A. 4. Investor A buys a zero growth stock, which pays annual dividends of $8, at a price to yield i = 7% . After receiving the 10th dividend investor A sells the stock to investor B to yield i = 8% . (a) Find the IRR for investor A. (b) Find the e/ective annual yield rate earned by investor A if each of the dividends earned i = 5% in a saving account. (c) Repeat part b) assuming an annual growth rate of 1% (e.g. D = 8 ; D 1 = 8 : 08 ; ::: ). 5. Given that the e/ective annual spot rate is i ;k = : 048 + : 002 k , &nd f 2 ; 5 : 6. You are given: 6-month T-bills sell for $95 1 1-year T-bills sell for $90 1.5-year bonds with 8% coupons paid semiannually sell for $95.80 2-year bonds with 10% coupons paid semiannually sell for $98.55 Calculate the 6-month, 1-year, 1.5-year and 2-year annual e/ective spot rates. i ;: 5 = 100 95 2...
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- Spring '09
- following spot rates, Extra Problem Set, following quoted prices