- Information
- AI Chat
Tutorial 1 A212 Question
Advanced Financial Management (BWFF2043)
Universiti Utara Malaysia
Recommended for you
Preview text
TUTORIAL 1
- ABC company has identified an investment project with the following cash flows. If the discount rate is 8%, what is the future value of these cash flows in year 4?
year Cash flows($) 1 940 2 1090 3 1340 4 1405
Samuel plans to save RM75,000 for his wedding that he has fixed 6 years from now. He plans to set aside an equal amount of money on the first day of each year starting today. The expected rate of return on his savings is 7% per annum. How much does Samuel needs to save each year to achieve his goal?
You plan to invest RM2000 a year in one of the Malaysian unit trusts for the next 20 years. You would like to know the effect of investing this money at the beginning of each year rather than waiting until the end of each year. Calculate the difference in the future value of your investment at the end of 20 years as an ordinary annuity versus an annuity due, assuming a 10% interest rate.
4**.** What would you pay for a bond that pays an annual coupon of RM35, has a face value of RM1,000, matures in 7 years, and has a yield to maturity of 8%?
- Porta bonds have a par value of RM1,000. The bonds pay RM40 in interest every six months and will mature in 10 years.
a. Calculate the price if the yield to maturity on the bonds is 7, 8, and 9 percent, respectively.
b. Explain the impact on price if the required rate of return decreases.
- Given the opportunity to invest in one of the three bonds listed below, which would you purchase? Assume an interest rate of 7%.
Bond Face value Annual Coupon Rate Maturity / Price RM1,000 4% 1 year / RM RM1,000 7% 17 years/ RM 990 RM1,000 8% 25 years / RM
Bakum's RM1,000 par value bonds currently sell for RM798. The coupon rate is 10%, paid semiannually. If the bonds have five years before maturity, what is the expected rate of return of the bond?
MSugar is expected to pay a RM1 per share dividend at the end of the year.
The stock sells for RM20 per share and its required rate of return is 11 percent. The
dividend is expected to grow at a constant rate, g, forever. What is the growth rate, g, for this stock?
- A common stock has just paid a dividend of RM2. If the expected long run
growth rate for this stock is 11 percent, and if investors require a 19 percent rate of
return, what is the price of the stock?
- Melur Trading’s most recent dividend was RM2 per share. The dividend is
expected to grow at a rate of 6 percent per year. The risk free rate is 5 percent and
the return on the market is 9 percent. If the company’s beta is 1, what is the price
of the stock today?
Father and Sons Enterprises is a relatively new firm that appears to be on the road to great success. The company paid their first annual dividend yesterday in the amount of $0 a share. The company plans to double each annual dividend payment for the next three years. After that time, they are planning on paying a constant $1 per share indefinitely. What is one share of this stock worth today if the market rate of return on similar securities is 11 percent?
Malisdo Bhd pays no dividend at the present time. The company plans to start
paying an annual dividend in the amount of RM0 per share for two years
commencing two years from today. After that, the company plans on paying a
constant RM1 per share dividend indefinitely. If your required return is 14 percent
and the market price of this stock is RM5, are you willing to buy this share? Why?
Tutorial 1 A212 Question
Course: Advanced Financial Management (BWFF2043)
University: Universiti Utara Malaysia
