please help with these questions

QUESTION ONE

Diana, a 4th year BAFM student has just received a lumpsum payment of Kes 10 million after participating in sport betting She is contemplating investing Kes 5 millon in stocks of Kiserian Ltd today that pays a 6% annual dividend. The T-bill rate is 7.5% and Diana expects the market to rise in value by 10% per year. The Directors of Kiserian Ltd have approved an expansion project that is expected to increase the firms annual cash inflow by Ksh 100 million. Information on this project will be released to the market together with the announcement of the rights issue. This dividend together with the companys earnings is expected to grow by 5% annually after investing in the expansion project. In order to effectively manage it risk, Kiserian Ltd invested in 2-asset portfolio to diversify it incomes. Their weights of the assets are 45% and 55% respectively, their standard deviations are 2.1% and 3.2% and their betas are 0.9 and 1.2, respectively. Their mutual correlation coefficient is 0.5.

Required;

(a) Calculate the expected return of the portfolio (2 Marks)

(b) Calculate the portfolio beta (5 Marks)

(c0 Based on the results in (i) above, comment on the risk profile of Kiserian Management Limited, in relation to the market (3 Marks)

(d) Do you think Diana has adopted the right investment strategy considering her age and investment time horizon? Justify your answer (2 Marks)

(e) Investing in shares is riskier than investing in fixed-income investments. Having a portfolio of shares subjects investors to an emotional roller-coaster. This was a comment made by one Expert Panelist during an Investment media coverage at KTN TV. Comment on the statement above and discuss four key risks associated with shares. (3 Marks)

QUESTION TWO

(a) The following data was obtained from Belcom Microfinance- a licensed microfinance Bank during the financial year 2020-2021:

Net Income: $. 1,500,000

Number of equity shares (2020): 150,000

Number of equity shares (2021): 250,000

Dividend paid: $. 400,000

Required:

Calculate the following market value ratios for Belcom Microfinance.

(i) Earnings per share (EPS) (2 Marks)

(ii) Dividend per share (DPS) (2 Marks)

(iii) Dividend Payout ratio (2 Marks)

(iii) Retention Ratio (2 Marks)

(b) You have been tasked by the Belcom Microfinance management to calculate the value of a 3-year bond with face value of Kes. 1,200,000 and coupon rate being 12% paid annually. Calculate the value of the bond and advise whether Belcom microfinance should sell or keep the bond (7 mks)

QUESTION ONE participating in spoet betting she is contemplating investing Kes 5 millon in stocks ef Kiscrian Lid boday that pays a 6 ; annual dividead. The T-6ill rate is 7.90 and Diana eopects the market bo rise in value by 30 for per year. The Directors of Kiverian Lid have apgeved an ecpension popoct thon is ecpeced to increase the fim's ancual eash inflew by Kib 100 million. Infcemation on this pryoct wilt be relewed to the market logether with the amosecement of the eights issue. This dividend together with the company's camings is evpectod wo grow by 9% annually affer itseititg in the evpanisod project in ouder lo effectively manage it risk, Kiscrian lad imected in Zasset poetfolie to derersify it incomes. Their weiphes of the msets are 4% mal soe repectively, their standand deviatiens are 2th and 3.D and their botas ace 69 and 12 . rexpedively. Their muftal correlation coeffecient is 05. Reguiont: (a) Caloulate the expecied seturs of the portfolio (2. Miarks) (b) Calculare the pontotis bera (5 Marks) (60)Based on the results in (i) above, comment en the risk profile of Kiverian Management Limited, (3 Marks) felationt bo the maket (d) Do you think Diana has adopod the ripht inveameet stratezy convidering har age and itheckesen time berizon? Justify your anvwer 42 Marks) (e) Tleveting in shares is riakies than investing in fived-inceeme investmenti. Having a pontsolio of shares subjects" iavestors 10 an emodienal noller-ecaster". Thits was a cemment made by ene H Expert Pandist during an laxcsiment modia coverage at KTN TV. Comment on the statement alene and ciscuss fext key risks associaked with sharei. 43 Marks) QUESTION TWO (a) The following drata was oberincal form Befoum Microfinance- a lisensod microfinasce Black buring the financial year 20002021 : Net Income: \$. 1,500000 Number of equiry shares (20121): 2e0,000 Dividend paid: 3 . 4ncoio Requiont: Calculate the follereing marked value ratios foc Bakem Microfinance (i) Eamings per share (EPS) (2. Marias) (ii) Dividend per share (DMrS) (2) Marks) (iii) Divisend Payout ratio (2. Marks) (iia) Resention Patio (2. Marka) (b) Yew have been tasked by the lieksom Microfinance management to calculde the value of a 3 . (7 Marka) QUESTION ONE participating in spoet betting she is contemplating investing Kes 5 millon in stocks ef Kiscrian Lid boday that pays a 6 ; annual dividead. The T-6ill rate is 7.90 and Diana eopects the market bo rise in value by 30 for per year. The Directors of Kiverian Lid have apgeved an ecpension popoct thon is ecpeced to increase the fim's ancual eash inflew by Kib 100 million. Infcemation on this pryoct wilt be relewed to the market logether with the amosecement of the eights issue. This dividend together with the company's camings is evpectod wo grow by 9% annually affer itseititg in the evpanisod project in ouder lo effectively manage it risk, Kiscrian lad imected in Zasset poetfolie to derersify it incomes. Their weiphes of the msets are 4% mal soe repectively, their standand deviatiens are 2th and 3.D and their botas ace 69 and 12 . rexpedively. Their muftal correlation coeffecient is 05. Reguiont: (a) Caloulate the expecied seturs of the portfolio (2. Miarks) (b) Calculare the pontotis bera (5 Marks) (60)Based on the results in (i) above, comment en the risk profile of Kiverian Management Limited, (3 Marks) felationt bo the maket (d) Do you think Diana has adopod the ripht inveameet stratezy convidering har age and itheckesen time berizon? Justify your anvwer 42 Marks) (e) Tleveting in shares is riakies than investing in fived-inceeme investmenti. Having a pontsolio of shares subjects" iavestors 10 an emodienal noller-ecaster". Thits was a cemment made by ene H Expert Pandist during an laxcsiment modia coverage at KTN TV. Comment on the statement alene and ciscuss fext key risks associaked with sharei. 43 Marks) QUESTION TWO (a) The following drata was oberincal form Befoum Microfinance- a lisensod microfinasce Black buring the financial year 20002021 : Net Income: \$. 1,500000 Number of equiry shares (20121): 2e0,000 Dividend paid: 3 . 4ncoio Requiont: Calculate the follereing marked value ratios foc Bakem Microfinance (i) Eamings per share (EPS) (2. Marias) (ii) Dividend per share (DMrS) (2) Marks) (iii) Divisend Payout ratio (2. Marks) (iia) Resention Patio (2. Marka) (b) Yew have been tasked by the lieksom Microfinance management to calculde the value of a 3 . (7 Marka)