Economics Homework Help

Q1. NTL Company is issuing eight-year bonds with a coupon rate of 6.5 percent and semiannual coupon payments. If the current market rate for similar bonds is 8 percent, what will be the bond price? If the company wants to raise $1.25 million, how many bonds does the firm have to sell? 1 mark

Q2. Suppose a 3-year bond with a 6% coupon rate that was purchased for $760 and had a promised yield of 8%. Suppose that interest rates increased, and the price of the bond declined. Displeased, you sold the bond for 798.8 after having owned it for 1 year. What is the realized yield? 1 mark

Q3. Ahmed is interested in purchasing the common stock of Inch, Inc., which is currently priced at $ 40. The company is expected to pay a dividend of $3 next year and to grow at a constant rate of 8 percent. 1 mark

a. What should the market value of the stock be if the required rate of return is 15.75 percent?

b. Is this a good buy? Why or why not?

Q4. Briefly compare the NPV, PI, and IRR criteria. What are the advantages and disadvantages of using each of these methods? 2 marks