Q.1 With reference to price and value, comment on this potential investment as proposed by Waleed. (3 marks)

Q.2 Comment on any other issues Waleed or Fiona might be concerned about. (2 marks)

Waleed follows the financial markets as a hobby. He usually does not make investments but keeps a record of his analysis and monitors the outcomes whilst pretending he did make the investments or divestments. Waleed calls this record his "virtual portfolio" and the outcomes have been consistently positive. This month Waleed reviewed the corporate bonds of a company called Green Limited. The market price of these bonds is AUD880. Waleed estimates the theoretical price of the bonds to be much higher. Based upon his analysis and the performance of his virtual portfolio he wants Fiona to agree to using all of their cash surplus of AUD25,000 to purchase the bonds in the market as an investment. The bonds have a remaining term of 8 years, a 4% coupon (semi annual) and a face value of AUD1,000. The yield on similar bonds is 6%