2. (a) Hana is considering investing in either two outstanding bonds. Bond A pays interest annually and bond B pays interest semiannually. The current selling price for bond A is RM1,100 and bond B is RM915, respectively. Par value of both bonds are RM1,000. The information is shown in the following table: Bond Coupon interest Period Interest rate A 14% 20 12% B 8% 15 10% Based on information above, calculate: (0) Value of bond A and bond B. (3 marks) (ii) Current yield for bond A and Yield to maturity for bond B. (3 marks) Aftab bought a Hasnan's Berhad bond for RM1,500 with par value of RM1,000 and 10 percent coupon rate, twelve years ago. It has a 20 years maturity and required rate of return is 12 percent. Today he got a call, Hasnan's Berhad wishes to buy back it's bond with call price RM1,800. He survey and found that market price for bond is RM1,600. Calculate the Yield to Call (YTC) for the bond. (3 marks) (b) FINANCIAL MANAGEMENT 1/3 CONFIDENTIAL (c) Rahim is considering the following three investment securities: i. A bond that selling in the market at RM880. The bond has a RM1,000 par value, pays coupon interest at 6 percent per annum (paid semiannually) and is schedules to mature in 10 years. For the bond of this risk class Rahim believe that the required rate of return is 8 percent. ii. A preferred share has a RM100 par value that sells for RM50 and pays an annual dividend of RM4. The required rate of return is 8 percent. iii. A common share has a RM30 par value that recently paid a RM2.50 dividend. The common share's growth rate at 15 percent for the first three years, 17.5 percent for the next two years and 10 percent thereafter. The share is currently selling at RM28 and Rahim think a reasonable required rate of return for the share is 20 percent