Bond L M N Par Value (5) 1000 100 500 Annual Coupon Years to Required Interest Rate (%) Maturity Return (%) 9 5 6 10 8 10 18 17 15 1) (a) Calculate the current value of Bond L. (See Table 6.2) (b) What will happen to the value/price as the bond approaches maturity? 2) Calculate the current value of Bond M. (See Table 6.2) 2 3) Calculate the current value of Bond M if the time of maturity is six years. (See Table 6.2) 4) (a) Calculate the current value of Bond N. (See Table 6.2) (b) What will happen to value/price as the bond approaches maturity? 5) Champion Breweries must choose between two asset purchases. The annual rate of retum and related probabiliti given below summarize the firm's analysis. Asset A Rate of Return Probability 10% 30% 15 40 20 30 Asset B B Rate of Return Probability 5% 40% 15 20 25 40 For each asset, compute (a) the expected rate of return (b) the standard deviation of the expected return (c) the coefficient of variation of the return (d) Which asset should Champion select? 6) Dr. Dan is considering investment in a project with beta coefficient of 1.75. What would you recommend him to do if this investment has an 11.5 percent rate of retum, risk-free rate is 55 percent, and the rate of return on the market portfolio of assets is 8.5 percent? You are going to invest $20,000) in a portfolio consisting of assets X, Y, and Z, as follows: Table 8.2 Asset Y Z Annual Return 10% 8% 16% Probability 0.50 0.25 0.25 Beta 12 16 2.0 Proportion 0.333 0.333 0.333 7) Given the information in Table 8.2, what is the expected annual retum of this portfolio? 8) The beta of the portfolio in Table 8.2, containing assets X, Y, and Z, is 9) Given the returns of two stocks J and K in the table below over the next 4 years. Find the expected re and standard deviation of holding a portfolio of 40% of stock J and 60% in stock K over the next 4 ye 2010 2011 2012 2013 Stock 10% 12% 13% 15% Stock K 9% 8% 10% 11%