# Financial Management

**Question description**

Respond to the items below.

**Part
A:** Moore Company
is about to issue a bond with semiannual coupon payments, a coupon rate of 8%,
and par value of $1,000. The yield-to-maturity for this bond is 10%.

a. What is the price of the bond if the bond matures in 5, 10, 15, or 20 years?

b. What do you notice about the price of the bond in relationship to the maturity of the bond?

**Part B:** The Crescent
Corporation just paid a dividend of $2 per share and is expected to continue
paying the same amount each year for the next 4 years. If you have a required
rate of return of 13%, plan to hold the stock for 4 years, and are confident
that it will sell for $30 at the end of 4 years, how much should you offer to
buy it at today?

**Part C:** Use the
information in the following table to answer the questions below.

State of Economy |
Probability of State |
Return on A in State |
Return on B in State |
Return on C in State |

Boom |
.35 |
0.040 |
0.210 |
0.300 |

Normal |
.50 |
0.040 |
0.080 |
0.200 |

Recession |
.15 |
0.040 |
-0.010 |
-0.260 |

a. What is the expected return of each asset?

b.* *What is the variance of
each asset?

c.* *What is the standard
deviation of each asset?

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