Financial Econometrics Assignment: Bond Valuation and Dividend Policy

This document presents a comprehensive solution to a Financial Econometrics assignment. It encompasses the analysis of bond valuation, including yield to maturity and rate of return calculations, under varying market conditions. The assignment delves into stock valuation techniques, such as the Gordon Growth Model, and assesses the impact of growth forecasts and payout ratios on share prices. Furthermore, it explores the implications of dividend policy, examining how changes in dividend payouts and capital structure signal information to investors. The solution provides detailed calculations and explanations, addressing scenarios involving changes in interest rates, company growth, and profitability, along with a discussion of dividend policy implications. The assignment includes a bibliography of relevant academic sources.