06-26-2010, 07:44 AM
Question 1: 10 marks
Given the following information for the stock of Foster Company, calculate its beta.
mgt201 (2) vuhelp.JPG (Size: 30.9 KB / Downloads: 98)
Question 2: 20 marks
ABC Company is considering investing in either of the two outstanding bonds. Both bonds have Rs.2,000 par values and 10% coupon interest rates and pay annual interests. Bond A has exactly 3 years to maturity, and bond B has 5 years to maturity.
a) Calculate the value of bond A if the required rate of return is 14%.
b) Calculate the value of bond B if the required rate of return is 14%.
c) If ABC wants to minimize the Interest Rate Risk, which bond should be purchased? Why.
Given the following information for the stock of Foster Company, calculate its beta.
mgt201 (2) vuhelp.JPG (Size: 30.9 KB / Downloads: 98)
Question 2: 20 marks
ABC Company is considering investing in either of the two outstanding bonds. Both bonds have Rs.2,000 par values and 10% coupon interest rates and pay annual interests. Bond A has exactly 3 years to maturity, and bond B has 5 years to maturity.
a) Calculate the value of bond A if the required rate of return is 14%.
b) Calculate the value of bond B if the required rate of return is 14%.
c) If ABC wants to minimize the Interest Rate Risk, which bond should be purchased? Why.