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1. (1) Suppose, Ford Motor Company sold an issue of bonds with a 12-year maturity, a 10% coupon rate, and monthly interest payment. If current

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1. (1) Suppose, Ford Motor Company sold an issue of bonds with a 12-year maturity, a 10% coupon rate, and monthly interest payment. If current market price of the bond is $450, what will be the yield to maturity (YTM)?... ..[5] (II) What is the difference between bond's coupon rate and its YTM?.......11 (III) Differentiate between YTM and YTC..... ...[2.5+2.5-5) 2. (1) Seven Rings Company bought bond 15-years ago that has 7% coupon interest with $1,000 face value, matures in 6 years. Investors require a rate of return equal to 11% and interest is paid quarterly. Three years after the bonds were issued, what should be the market price of the bond?...[5] (IT)Based on market/ face value and Coupon rate/YTM, what kind of bond you found in the above math?...... (III) Explain the classification of bond using the relationship with Face and market value[5] 3. (1) The common stock of Rahim Afroz Company is currently selling for $30 per share. The company has been growing at a constant annual rate and the growth is expected to continue for an infinite period. If $25 is the next dividend you would receive and investors require 11%, What is the constant growth rate?...... .... [5] (IT)Suppose, intrinsic value of the above-mentioned stock is $28. What kind of stock you found? What will be your decision? Explain why?... (III) Explain the relationship between the price of a share(P), dividend (D), growth in dividend (g) and required rate of return (t).... 4. (1) Suppose you are a financial analyst of Black Berry Corporation. The director of capital budgeting has asked you to analyze to proposed capital investment-Project A and B. Each project has a cost of $5,00,000 and the cost of capital for both projects is 11%. The projects' net expected cash inflows are: Year Cash Flows (Project A) Cash Flows (Project B) 3,25,000 1,75,000 1,50,000 1.75,000 ...[5] 1 2 3 1,50,000 1,75,000 4 50,000 1,75,000 (A). Calculate NPV. Considering accept rejection criteria, which project will you accept? Explain why?... (B)Calculate IRR. Considering accept rejection criteria, which project will you accept? Explain why?.. . [5] (C) IRR has some fallacies for which MIRR has been invented" Explain the statement. ...[2]

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