An investor needs to decide about purchasing one bond and one stock in his portfolio. the information about the investment is:
Bond Alpha: matures in 2 years has a face value of 20,000$, and a yield to majority of 0.10 and yearly coupon rate 0.12. bond A would be paid semiannual interest.
Ford stock: it has been expected to begin paying dividends, beginning with a dividend of $10 coming 3 years from today. After year 3 growth should be a constant at 5% per year. The required rate pf return on Ford’s stock is 15%
Required:
What is the intrinsic value of Bond Alpha and Ford stock?
Does the bond sell on premium or discount?
