Question
Mrs. Linda, CFA, is a fixed income analyst. She is currently analyzing three bonds (Bond A01, Bond B02, and Bond C03). She strongly believes that
Mrs. Linda, CFA, is a fixed income analyst. She is currently analyzing three bonds (Bond A01, Bond B02, and Bond C03). She strongly believes that the appropriate market bond yield is 8 percent per annum. She documents the following information:
Bond A01 | Bond B02 | Bond C03 | |
Face value (IDR) | 500000000 | 1000000000 | 2000000000 |
Issued | 1-July 2020 | 1 July 2020 | 1July 2020 |
Maturity | 1 July 2030 | 1 July 2040 | 1 July 2050 |
Coupon Rate | 6 % | 8% | 10% |
Coupon Payment | Quarterly | Semi anuall | anuall |
Price (IDR) | 420000000 | 985000000 | 2500000000 |
Mr. Dimas, CFA, is a security analyst. He is currently analyzing three shares (ABC007, DEF008, and XYZ009). He strongly believes that the appropriate required rate of equity return is 13 percent per annum. He documents the following information:
ABC007 | DEF008 | XYZ009 | |
Just Paid Devidend (IDR) | 1000 | 500 | 0 |
First Devidend Growth | 3% | 10% | 0% |
Second Devidend Growth | 3% | 5% | 0% |
First Growth Years | 1 to 5 | 1 to 3 | N/A |
Second Growth Years | 5 to 100 | 4 to 10 | N/A |
Price (IDR) | 15000 | 3000 | 6700 |
Questions:
1). Evaluate the potential mispricing of those three bonds!
2). Explain further consideration when Linda attempts to value those bonds!
3). Evaluate the potential mispricing of those three shares!
4). Explain further consideration when Dimas attempts to value those shares!
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