Constraints of Book Binding Industry

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I. Bond Valuation 1. A Rs.100 par value bond bearing a coupon rate of 12 per cent will mature after 5 years. What is the value of the bond, if the discount rate 15 per cent? 2. The market price of a Rs. 1000 par value bond, carrying a coupon rate of 14 per cent and maturing after 5 years is Rs. 1050. What is the yield to maturity (YTM) of this bond? 3. A Rs. 100 par value bond bears a coupon rate of 14 per cent and matures after 5 years. Interest is payable semi-annually. Compute the value of the bond if the required rate of return is 16 per cent? II. Equity Valuation 1. The equity stock of Rax Ltd., is currently selling for Rs. 30 per share. The dividend expected next year is Rs.2 per share. The investor’s required rate of…show more content…
3. The data for three stocks are given. The data are obtained from correlating returns on these stocks with the returns on these stocks with the return on the market index. Stock | αi | βi | Residual variance (σ2ei) | 1 | -3.1 | 1.7 | 16 | 2 | 1.6 | 0.6 | 09 | 3 | 1.4 | 1.6 | 18 | Which single stock would an investor prefer to own from a risk return view point, if the market index were expected to have a return of 18 per cent and a variance of return of 21 per cent? 4. A security pays a dividend of Rs. 3.60 and sells currently at Rs. 80. The security is expected to sell at Rs.90 at the end of the year. The security has a beta value of 1.35. The risk free rate is 6 per cent and the expected return on market index is 13 per cent. Assess whether the security is correctly priced? 5. The following data are available to you as portfolio manager. Security | Estimated return (%) | Beta | Standard deviation (%) | M | 28 | 2.0 | 50 | N | 26 | 1.8 | 40 | O | 20 | 1.0 | 25 | P | 12 | 0.8 | 30 | Q | 10 | 0.5 | 20 | Market
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