15 Marks Ali has $9,000 to invest and is considering the following securities for his portfolio: a. Ordinary shares of B

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15 Marks
Ali has $9,000 to invest and is considering the following securities for his portfolio:
a.
Ordinary shares of Biotech Ltd that has recently paid a yearly dividend of $4.50 and the
company has forecasted an estimated dividend growth rate of 4% pa indefinitely. If Ali's
required rate of return is 15%, how much will he be prepared to pay for Biotech shares? (Sh
answer correct to the nearer cent.) If Ali invests all the funds to buy this share explain how n
shares Ali can buy.
b. A bond issued by DMO Ltd that has a face value of $1,000 and a coupon rate of 5% pa. Th
coupons are paid semi-annually and the bond has 10 years to maturity and 6.5% pa yield.
Calculate the price of the bond (show answer correct to the nearer cent). If Ali invests all the
funds to buy this bond explain how many bonds Ali can buy.