INV3702 ASSIGNMENT 02 Work through lessons 1 to 7 ; then answer the following questions. Submil your assignment as a pod document via myUnisa. Question 1 Yrua whesens the thilhainn enuaneisn hronte Determine whether Bond E is overvalued, undervalued or lairly valued. Al coupors are paid ancwally. (3) Question 2 A trader observes the following bonds and compares each bond s yield to maturity to the yield on bonds which are simllar. If the trader expects the bond yields to retum to the yiclid of the peer group. which bond should the lrader buy and why? (3) Question 3 Ms Koiog is a bond portfolio manager who supgorts the pure expectations theory of the torm structure of interest rates. Her porffolio includes two bonds issued by the same institution (Bond A and Bond B). Both bonds have S years remaining to maturity, a R10 000 par value. and both have semiarnual coupons of 8% p.a. Bond A is cption free and currently trades at a price of 101,4723 . Bond B is callable at any time beginning one year from loday and currently trades at a price of 102.3462 . Ms Koko has received funds of R100 000 which she would lke to use to increase her investment in one of the bonds (ether Bond A or Bond B) She observes an inverted yield curve, and decides to allocate the additional funds to Bond A. Based on her expectations, is Koko's decision comrect or incorrect? Justly your answer. (4) Question 4 An analyst collocts the following financial infomafon to assess the credit quality of Company Y and Company Z, relative to each other and their industry average. Calculate adjusted financial ratios for both companies and the industry, and evaluate the relative creditworthiness of Compary Y and Company Z. (4)