RETURN, RISK AND VALUATION

Prepare solution using excel work sheet . Should explain or interpret the answer.

i.SPQ Company has an issue of RM100 par value bonds with a 7 percent coupon interest rate.The issue pays interest semiannually and has 5 years remaining to its maturity date.Bonds of similar risk are currently selling to yield a 11 percent rate of return.What is the value of these SPQ Company bonds?

ii.Rashid has recently inherited RM100,000 and is considering purchasing bonds of the Lucky Berhad.The bond has a par value of RM1,000 with 7 percent coupon rate and will mature in 5 years.What is the value of the bond if the required rate of return is 8.5%? How many bonds he can buy with the above funds?

iii.Calculate the price of a share of each company, given the information regarding dividends, the growth rate of dividends and the required rate of return:

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