2. A group of speculators are interested in the Bradman preference shares as the current market interest rates are quite volatile. These speculators hope to gain from the potential movement in market rates. The group believes that the future course of rates will follow a downward trend, which should translate into an increase in their equity value.

a. Given the information about Bradman preference shares and your valuation calculations from question 1, what will be the realised holding period return on this investment if the market yield on the preference shares drops to 5% after one year?

b. What will be the realised holding period return on this investment if the market yield on the preference shares rises to 8% after one year?