Growth stocks typically have a lower current return than income ...

[09madisonrousseau09]

Growth stocks typically have a lower current return than income stocks.
 
  Indicate whether the statement is true or false

Question 2

FYI bonds have a par value of 1,000. The bonds pay 40 in interest every six months and will mature in 10
  years.
 
  a. Calculate the price if the yield to maturity on the bonds is 7, 8, and 9 percent, respectively.
  b. Explain the impact on price if the required rate of return decreases.
  c. Compute the coupon rate on the bonds. How does the relationship between the coupon rate and the yield to
  maturity determine how a bond's price will compare to it par value?

[Perkypinki]

Answer to Question 1

TRUE

Answer to Question 2

a. 7 YTM price = 1,071.06
8 YTM price = 1,000.00
9 YTM price = 934.96
b. The price of the bond will increase.
c. Coupon rate = (40  2)/1,000 = 8
A bond with a YTM above the coupon rate will sell at a discount (below par value). The investor will pay less than the
par value for the bond, but will receive its par value at maturity. This built-in gain drives the investor's return up
above the coupon rate. If the coupon rate equals the YTM, the bond will sell for its par value. If the YTM is below the
coupon rate, the coupons are attractive thus an investor will pay more than the par value for the bond.

[09madisonrousseau09]

TY

[Perkypinki]

Happy to Help