coupon: $35
n = 18
PV 1,038.50
YTM = 3.21496 * 2 = 6.42992%
The next dividend payment by Wyatt, Inc., will be $2.30 per share. The dividends are anticipated to maintain a growth rate of 4.5 percent forever. Assume the stock currently sells for $39.85 per share.
What is the dividend yield? 2.30 / 39.85 = 0.05772, or 5.772%
What is the expected capital gains yield? g = 4.5%
since P0 = D1 / (r - g)...
39.85 = 2.30 / (r - 0.045)
0.05772 = r - 0.045
r = 0.10272, or 10.272%
next year...D = 2.30(1+g) = 2.30(1.045) = $2.4035
Price next year "P2": 2.4035 / 0.05772
= 41.64325
return from capital gains:( P2 / P1) - 1
(41.64325 / 39.85) - 1 = 0.045, or 4.5%
so return from dividend yield + return from capital gains yield = r
0.05772 + 0.045 = 0.10272, or 10.272%
1.
The Timberlake-Jackson Wardrobe Co. has 7 percoupon bonds on the market with 9 years left to maturity. The bonds make annual payments. If the bond currently sells for 1,038.50 what is its YTM?
2.
The next dividend payment by Wyatt, Inc., will be $2.30 per share. The dividends are anticipated to maintain a growth rate of 4.5 percent forever. Assume the stock currently sells for $39.85 per share.
What is the dividend yield?
What is the expected capital gains yield?
thank you very much..
