ECOM 050, Investment Management

Tutorial 1

投资管理代写 A 10-year German Government bond has a face value of Є100 and an annual coupon rate of 5%. Assume that the interest rate is 6% per year.

Question 1

A 10-year German Government bond has a face value of Є100 and an annual coupon rate of 5%. Assume that the interest rate is 6% per year. What is the PV of the bond?

Question 2

Suppose that the German bond (above) makes coupon payments semi-annually like a US bond (the bond would pay 2.5% every six months). What is the PV in this case?

Question 3 投资管理代写

Delta Plc has 1.5 million shares in issue which have a total market value of £1.35 million. It has just paid an annual dividend of 9p and has constant dividend growth of 5%. It is also partly funded by debt. The debt (each bond has a face value of £100 and 4 years left to maturity) has a total book value of £1 million. The bonds have a coupon rate of 6% and a yield to maturity of 8%.

a) Estimate the market capitalization rate (or expected rate of return on equity) for Delta Plc

b)What is current bond price of Delta Plc’s debt?

c)What would the price of the bond be in twelve months time if the yield to maturity at that point were risen to 10%?

Question 4

Horse & Buggy Plc is in a declining industry. Sales, earnings and dividends are all shrinking at a rate of 10% per year.

a.If the return on equity is 15% and the next dividend is £3, what is the current share price?

b.What do you expect the share price to be in one year?

Question 5 投资管理代写

Bull Corporation has a ROE of 20%. It has a plowback ratio of 0.3 and its earnings this year will be £4 per share. Assuming shareholders require a return of 12%

a.What is the current share price?

b.What is the current Price-Earnings-Ratio (PER)?

c.What happens to the PER if the plowback ratio was 0.2?


Question 6

Pilk Plc has just paid a dividend of $2. It expects this to grow at 20% for three years. From then on it expects growth at a constant rate of 4%. Assuming the shareholders have a required rate of return of 15%, what is the stock price?

Question 7 投资管理代写

Jessy Cooper PLC currently pays a dividend of $1.22, which is expected to grow indefinitely at 5%. If the current price (value) of JC shares based on the constantgrowth dividend discount model is $32.03, what is the required rate of return r=k?

Question 8

a.Computer stocks currently provide an expected rate of return of 16%. MBI, a large computer company, will pay a year-end dividend of $2 per share. If the stock is selling at $50 per share, what must be the market’s expectation of the growth rate of MBI dividend?

b.If the dividend growth forecasts for MBI are revised downward to 5% per year, what will happen to the price of MBI stock?

Question 9 投资管理代写

a.MF Corporation has an ROE of 16% and a plowback ratio of 50%. If the coming year’s earnings are expected to be $2 per share, at what price will the stock sell? The market capitalization rate is 12%.

b.What price do you expect MF shares to sell for in 3 years?

Question 10

If a security is underpriced (i.e. its intrinsic value>price), then what is the relationship between its market capitalization rate and its expected rate of return?