Question 1

a.) ALC Ltd issued a corporate bond 6 years ago. This 25-year 11.5 percent bond was issued at a par value of $1000. Coupons are paid semi-annually. The bond is currently selling at $886.15. Calculate the current yield to maturity for this bond

b.) The par value of the current 25-year 9% bond of JFC Ltd is $1,000. The bond has a remaining life of 6 years and the coupon is paid quarterly. The current market yield for a similar risky bond is 13.79%. What would be the expected market price for this bond?

c.) The market expects 14.1 percent returns from the ordinary shares of ELP Ltd, which has just declared a dividend of $4.72 per share. It is anticipating that the earnings and dividends of ELP Ltd share will grow at 16 percent for the next 3 years before settling down to a constant 3.4% growth rate. What price is expected for ELP share by the investors?