vv-5 - 4.00 $2.25 $37.50 =D33(B33-C33 The rates differ...

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#1 Par Coupon Rate Coupon Payment $1,000 5.875% $29.38 =(B2*C2)/2 $29.38 is the interest payment every 6 months. The full answer is $29.375, but rounded it's $29.38 #2 N PV FV PMT Semi-annual In YTM 30 year bond 52 $941.12 $1,000.00 $29.38 3.1700% 6.3401% =RATE(B8,E8,-C8,D8)*2 15 year bond 30 $941.12 $1,000.00 $29.38 3.2476% 6.4952% =RATE(B9,E9,-C9,D9)*2 #3 Value Dividend Required Rate $50.50 $2.93 5.802% =C17/B17 #4 Dividend Required Rate Value $2.93 8.000% $36.63 =B20/C20 #5 Dividend Growth Rate Next Year Dividend $2.16 4.00% $2.25 =B24*(1+C24) The actual answer is $2.2464 but we rounded up to $2.25 #6 Growth Rate Value Required Rate $2.25 4.00% $46.64 8.8242% =(B30/D30)+C30 #7 Growth Rate Value 10.00%
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Unformatted text preview: 4.00% $2.25 $37.50 =D33/(B33-C33) The rates differ because the additional $58.88 saved from the purchase of the bond is extrapolated over 52 periods for the 30 year bond, compared to the 30 periods for the 15 year bond. The shorter time period means that there is a greater yield per period for the 15 year bond. Next Year Dividend Required Rate Next Year Dividend You shouldn't buy the stock at the September 14th price ($46.64), because at a required rate of 10% the value of the stock is $37.50. You would be overpaying for the stock if you bought it for $46.64....
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