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QUESTION 4 [25 MARKS] (a) You own a bond that pays Rs 120 in annual interest, with a Rs 1,000 par value. It matures in 15 years. Your required rate of return is 12% per annum. (i) Calculate the value of the bond. [3 marks] (ii) How does the value of the bond change if your required return increases to 15%. [2 marks] (iii) How does the value of the bond change if your required return decreases to 8%. [2 marks] (iv) Draw an appropriate yield curve and explain the relationship. [3 marks] (b) On average, investors in the stock market this year are expected to earn a positive return (profit) on their investment. Some investors will earn considerably more than others. (i) Using the concept of Efficient Market Hypothesis, discuss why is it so? [9 marks] (ii) Explain any 2 anomalies that may incur in the stock market. [6 marks]