Question $2$

a$.$ Explain the factors that determine the coupon of a bond.

b$.$ You can buy a property today for $3$ million and sell it in $5$ years for $4$ million. $($You

earn no rental income on the property. If the interest rate is $8\%,$ what is the present

value of price you can sell at in $5$ years? What will be the present value if you also

could earn $200,000$ per year rent on the property?

c$.$ Explain in detail the Modigliani$-$Miller's dividend irrelevance proposition.Explain the factors that determine the coupon of a bond. $(10$ marks$)$

b$.$ You can buy a property today for $3$ million and sell it in $5$ years for $4$ million. $($You

earn no rental income on the property. If the interest rate is $8\%,$ what is the present

value of price you can sell at in $5$ years? What will be the present value if you also

could earn $200,000$ per year rent on the property? $(5$ marks$)$

c$.$ Explain in detail the Modigliani$-$Miller$$s dividend irrelevance proposition