# Stock and Bond questions

11. What is the yield-to-maturity of the following bond? WHY?

Price = 113

Discount Rate Present Value of Cash Flow of Bond

6% 120

8% 114

9% 112

10% 98

12. What is the return on the following investment?

Income = $400

Price t=0 = $3000

Price t=1 = $4000

13. Given the following information, calculate the Price of the stock.

g = 8%

r = 9%

d(1) = $4

14. Given the following data, calculate the price earnings ratio for the stock,

g = 8%

r = 9%

Payout ratio of earnings = 40%

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#### Solution Preview

11. What is the yield-to-maturity of the following bond? WHY?

Price = 113

Discount Rate Present Value of Cash Flow of Bond

6% 120

8% 114

9% 112

10% 98

The yield-to-maturity (YTM) of a bond is the discount rate which will make the present value of the cash flow of the bond equal to the price today. The price today is 113. At ...

#### Solution Summary

The solution explains the calculation of yield to maturity, return on investment, price of stock and price to earnings ratio