55. DML Ltd has a $100 face value bonds with 20 percent coupon rate and 5 years remaining until maturity. Interest payments are made semi-annually. You require a return of 16 percent to invest in this bond.

Required:

(a) What value would you place on this bond?

(b) Should the bond sell at a discount or at a premium? Explain.

i. Naija Investment Fund mobilises money from Nigerian students in Ghana and invests the moneys in commercial papers of Nigerian companies, certificate of deposit of Nigerian banks, and treasury bills of the Federal Republic of Nigeria. The fund started the year 2014 with a portfolio of assets valued at NGN4,500,000 and 10 million shares outstanding. Over the year, the fund invested in a portfolio of commercial papers, certificate of deposits, and Federal treasury which raked in total investment income of NGN900,000. The fund managers charge management fee at 2.5% of the value of assets invested.

Required:

(a) How would you classify the fund based on investment policy?

(b) Compute the NAV at the beginning of the year and at the end of the year.

(c) What is the rate of return for investors in the fund?