Unit 3 Assignment Finance

GB550: Financial Management | Unit 3

Details and Rubric This assignment is assessing learning outcome:

GB550-2: Calculate the value of a firm through the use of discounted cash flow analysis.

Problems:

1. Complete problem: Yield to Maturity for Annual Payments

XYZ Corporation’s bonds have 14 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $950. What is their yield to maturity? Show your work.

Complete problem: Required Rate of Return Show your work.

Suppose rRF = 5%, rM = 10%, and rA = 12%.

a. Calculate Stock A's beta.

b. If Stock A's beta were 2.0, then what would be A's new required rate of return?

2. Complete problem: Portfolio Beta

You have a $2 million portfolio consisting of a $100,000 investment in each of 20 different stocks. The portfolio has a beta of 1.1. You are considering selling $100,000 worth of one stock with a beta of 0.9 and using the proceeds to purchase another stock with a beta of 1.4. What will the portfolio’s new beta be after these transactions? Show your work.

Prepare this Assignment as a Word® document. List each question, followed by your answer.

Once completed, submit your Assignment to the Unit 3 Assignment Dropbox. The Assignment is due Tuesday 11:59 p.m. ET of their assigned unit.