| 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%. |
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| a. What is the price of the bond if the bond matures in 5, 10, 15, or 20 years? |
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| b. What do you notice about the price of the bond in relationship to the maturity of the bond? |
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| 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? |
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| Part C: Use the information in the following table to answer the questions below. |
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| State of Economy |
Probability of State | Return on A in State | Return on B in State | Return on C in State |
| Boom | 0.35 | 0.04 | 0.21 | 0.3 |
| Normal | 0.5 | 0.04 | 0.08 | 0.2 |
| Recession | 0.15 | 0.04 | -0.01 | -0.26 |
| a. What is the expected return of each asset? |
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| b. What is the variance of each asset? |
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| c. What is the standard deviation of each asset? |
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