1. A Baxter, Inc.’s bond has a 4 percent coupon and pays interest semi-annually. The face value is $1,000 and the current market price is $1,020.50. The bond matures in 15 years. What is the yield to maturity?
2. The bonds issued by Zander & Zander bear a 6 percent coupon, payable annually. The bond matures in 15 years and has a $1,000 face value. Currently the bond sells at par. What is the yield to maturity?
3. If a company’s bond rating is changed from CCC to BBB, what happens to the yield to maturity of the company’s bonds?
4. The stock of LOL has a beta of 0.96. The risk-free rate of return is 1.6 percent and the market risk premium is 8.2 percent. What is the required rate of return on LOL stock?