4a)Having a beta coefficient of 1.2, Siong Corporation pays out 40% of its earnings in dividends, and the latest earnings announced were $10 per share. Dividends were just paid and are expected to be paid annually. You expect that Siong will earn an ROE of 20% per year on all reinvested earnings forever. The risk-free rate of return is 8%, the expected rate of return on the market portfolio is 15%.

1. What is the intrinsic value of a share of Siong stock? (6 marks)
2. If the market price of a share is currently $100, and you expect the market price to be equal to the intrinsic value one year from now, what is your expected 1-year holding-period return on Siong stock? (6 marks)

4b)Consider a bond paying a coupon rate of 10% per year semiannually when the market interest rate is only 4% per half-year. The bond has three years until maturity.

i)Find the bonds price today and six months from now after the next coupon is paid. (4 marks)

ii)What is the total (6-month) rate of return on the bond? (4 marks)

4c)Explain semi-strong form of Efficient Market Hypothesis. (5 marks)