3. An investor is considering the purchase of the following bond

a. Face value Rs. 100

b. Coupon Rate 11%

c. Maturing 3 years

If he wants a yield of 13% what is the maximum price, he should be ready to pay for? If the bond is selling for Rs. 97.60, what would be the action on the bond (2.5Marks)

1b) Bonds of a cement company which carries AAA rating with 5 years to maturity and 16% coupon rate payable half yearly, is being traded at Rs. 1035. You as a fund manager of Trust Funds, an 60% Debt Fund were to ascertain the intrinsic value and take a decision accordingly.

Your Asset Management Company has laid down guidelines that for AAA Rated Instruments discount rate to be applied is 181 days T bill rate (Treasury Bill is 10%). +5%, for AA Rated Instruments the discount rate to be applied is 181 days T bill rate (Treasury Bill is 10 %) +7% You are required to compute a) Intrinsic Value of the bond b) Action on Bond (7.5 Marks)

(SUBJECT: CORPORATE FINANCE)