Homework Answers
Answer:
(4). Option B is the answer that is II only correct answer
If inflation increases ,the real rate return is decreased and bond prices will go up,so statement I is wrong.
If the yield to maturity increases or decrease , coupon rate will be same , but current yield are fluctuated. So option III also wrong.
Investor real rate of return decrease where inflation is stable then bond prices will go up. So option II is true.
(5). Sustainable growth rate= ROE×(1-dividend payout ratio)
ROE=net income ÷ equity
=$100÷$500=0.2
Dividend payout ratio =dividend÷net income
=$30÷$100=0.3
Sustainable growth rate =0.2×(1-0.3)
=0.2×0.7=0.14=14%
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