1)

A bond with 24-year maturity was issued 4 years ago. Face value of this 10.91% quarterly coupon paying bond is $2,000. Analysts find that the current yield to maturity of this bond is 13.07 percent. Show your workings and find the value of this bond. Compare this value against the face value of the bond and explain the difference, if any.

* Please show manual working and not Excel

2)

A firm has multiple net cash inflow return options from an investment of $21 million. Find the best option that would be aligned to the principal goal of Financial Management. Show your calculations to support your selection. The required rate of return for the firm is 13.43 percent.

Option (i): Cash inflows at the end of Year-1 $6 million, Year-4 $13 million and Year-5 $9 million;

Option (ii): Cash inflows of $1.42 million at the end of each quarter for next 5 years;

Option (iii): Cash inflows of $5.05 million at the beginning of each year for next 5 years;

Option (iv): Cash inflows of $0.32 million at the end of each month that will continue forever.

Option (v): Cash inflows of $5.05 million at the end of each year for next 4 years