QUESTION $425$ MARKS

$4\mathrm{.}1$ The market price of a security is R$400.$ Its expected rate of return is $13\%.$ The risk$-$free rate is $7\%,$ and the market risk premium is $8\%.$ What will the market price of the security be if its beta doubles $($and all other variables remain unchanged$)?$ Assume the stock is expected to pay a constant dividend in perpetuity. $(5$ marks$)$

$4\mathrm{.}2$ Consider a bond with a par value of R$1000$ paying a coupon rate of $10\%$ per year semi$-$annually when the market interest rate is only $4\%$ per half$-$year. The bond has three years until maturity. Determine the bond's price today and six months from now after the next coupon is paid. What is the total rate of return on the bond? $(5$ marks$)$

$4\mathrm{.}3$ Fincorp issues two bonds with par values of R$1000$ each with $20-$year maturities. Both bonds are callable at R$1050.$ The first bond is issued at a deep discount with a coupon rate of $4\%$ and a price of R$580$ to yield $8\mathrm{.}4\%.$ The second bond is issued at par value with a coupon rate of $8\mathrm{.}75\%.$ What is the yield to maturity of the par bond? If you expect rates to fall substantially in the next two years, which bond would you prefer to hold? $(5$ marks$)$

$4\mathrm{.}4$ A bond with a coupon rate of $7\%$ and par value of R$1000$ makes semi$-$annual coupon payments on January $15$ and July $15$ of each year. The Bond Exchange of South Africa $($BESA$)$ reports the ask price for the bond on January $30$ at $100\mathrm{.}125.$ What is the invoice price of the bond? The coupon period has $182$ days. $(5$ marks$)$

$4\mathrm{.}5$ You just saw an article on social media titled $$Transnet breaches loan terms again as debt hits R$138$ billion$.$ What do you make of the article and what are your thoughts on the article? $(5$ marks$)$