You have a choice between the following three investments: . A bank bill. The bill was...

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You have a choice between the following three investments: . A bank bill. The bill was issued as a 90-day bank bill 30 days ago. It has a face value of $100 and is currently trading at a yield of 5.75% p.a. A coupon bond issued by a AA-rated company. Fitch Ratings has estimated that the yield on debt issued by AA companies in the current interest rate environment to be 6.6%. The bond has a face value of $100, 5 years to maturity and makes semi-annual coupon payments at a coupon rate of 5.4% p.a. (a) (b) (c) . . An ordinary share. The share is expected to pay an annual dividend of $14 next year, $12 in year 2, $10 in year 3, and then $9 every year thereafter in perpetuity. Your required rate of return on this share is 10%. What is the value of the bank bill? What is the value of the bond? What is the value of the share? (3 marks) (3 marks) (4 marks) You have a choice between the following three investments: . A bank bill. The bill was issued as a 90-day bank bill 30 days ago. It has a face value of $100 and is currently trading at a yield of 5.75% p.a. A coupon bond issued by a AA-rated company. Fitch Ratings has estimated that the yield on debt issued by AA companies in the current interest rate environment to be 6.6%. The bond has a face value of $100, 5 years to maturity and makes semi-annual coupon payments at a coupon rate of 5.4% p.a. (a) (b) (c) . . An ordinary share. The share is expected to pay an annual dividend of $14 next year, $12 in year 2, $10 in year 3, and then $9 every year thereafter in perpetuity. Your required rate of return on this share is 10%. What is the value of the bank bill? What is the value of the bond? What is the value of the share? (3 marks) (3 marks) (4 marks)

Answer rating: 100% (QA)

a Value of Bank Bill Face Value x 1 Yield2 Number of Days365 Value of Bank Bill 100 x 1 005752 90... View the full answer