INVESTMENT ANALYSIS

1. (a) If you were offered $16,500 eight years from now in return for an investment of $7000, what annual rate of interest would you earn if you take the offer (do interpolation method) (10 marks)

1. (b) Pfizer issued bond that has a maturity period of 10 years with coupon rate of 10 percent that is payable every 6 months. The par value of the bond is $1000. If the required rate of return is 8 percent, what is the value of the bond? (4 m)

1.(c) Discuss the divergence of interest between principal and manager of a firm. (4m)

1. (d) Explain TWO ways to reduce the above divergence of interest and provide example for each. (4m)