Xpert
06-24-2011, 12:27 AM
Question ## 01*
*Current investigation has gathered the following financial data from ABC
Company. You are required to calculate the following:*
*Bond: **Calculate the value of a Rs. 5,000 (par value) bond paying interest
at an annual coupon interest rate of 10% with 10 years maturity and the
required return on similar**‐**risk bonds is currently a 12% annual rate
paid annually.*
*Common stock: **Company has recently paid annual dividend of Rs.1.50 per
common share this year. The Company expects earnings and dividends to grow
at a rate of 7% per year for the anticipated future. What required rate of
return for this stock would result in a price per share of Rs. 32?*
*QQuueessttiioonn ## 0022*
*Using the basic equation of capital asset pricing model (CAPM), solve
followings for the unknown.*
*1. Find the risk free rate of return with a required rate of return of 18%
and a beta of 1.50 when the market return is 16%.*
2. *Find the beta for a stock with a required rate of return of 15% when the
risk free rate of return and market risk premium are 10% and 2.5%
respectively.*
*(Show complete calculations and provide all formulas as they carry marks) *
*Current investigation has gathered the following financial data from ABC
Company. You are required to calculate the following:*
*Bond: **Calculate the value of a Rs. 5,000 (par value) bond paying interest
at an annual coupon interest rate of 10% with 10 years maturity and the
required return on similar**‐**risk bonds is currently a 12% annual rate
paid annually.*
*Common stock: **Company has recently paid annual dividend of Rs.1.50 per
common share this year. The Company expects earnings and dividends to grow
at a rate of 7% per year for the anticipated future. What required rate of
return for this stock would result in a price per share of Rs. 32?*
*QQuueessttiioonn ## 0022*
*Using the basic equation of capital asset pricing model (CAPM), solve
followings for the unknown.*
*1. Find the risk free rate of return with a required rate of return of 18%
and a beta of 1.50 when the market return is 16%.*
2. *Find the beta for a stock with a required rate of return of 15% when the
risk free rate of return and market risk premium are 10% and 2.5%
respectively.*
*(Show complete calculations and provide all formulas as they carry marks) *