15 Marks Ali has $9,000 to invest and is considering the following securities for his portfolio: a. Ordinary shares of B
Posted: Wed Apr 27, 2022 10:41 am
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.
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.