Q2. (a) Star Ltd.s share is currently selling at Rs. 410. Face Value of the share is Rs.10. The last dividend paid by the company was Rs. 9 per share with growth rate of 12% p.a. Beta of the stock is 1.5. Assuming Sensex is giving a return of 15% per annum whereas the risk- free rate of return is 6.5%. What should be the maximum price an investor would like to pay for this stock and why? [5 Marks]

Q-2: (b) Suppose the government is proposing to sell a 5-year bond of Rs 1,000 at 8 per cent rate of interest per annum. The bond amount will be amortised (repaid) equally over its life. If an investor has a minimum required rate of return of 7 per cent, what is the bonds present value for him?