Answer 1)
Value of Bond = Coupon / YTM
= 90 / 0.064
= 1406.25
Option 2 is correct.
Answer 2)
Value of Stock =
79 =
79* Rate of Return - 79 * 0.0290 = 2.058
Rate of Return* 79 - 2.291 = 2.058
Rate of Return = 2.058 + 2.291 / 79
Rate of Return = 5.51%
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