QUESTION 1 a) MDC builds and maintains freeway across Malaysia. They have an outstanding issue of RM100 par value bonds with a coupon an 5 percent coupon rate. The issue pays interest annually and has 12 years remaining to its maturity. i) If bonds of similar risk are currently earning a 4 percent rate of return, how much should MDC's bond sell for today? (3 marks) ii) Describe the two possible reasons why the rate on similar risk bonds is below the coupon rate on the MDC bonds. (4 marks) iii) If the required return were 10 percent instead of 4 percent, what would the current value of MDC's bond be? Contrast this finding with your findings in parti) and discuss. (3 marks) b) HPH Sdn Bhd is entering into 3-year remodeling and expansion project. The construction will have a limiting effect on earnings during that time, but when completed, it should allow the company to enjoy much improved growth in earnings and dividends. Last year, the company paid a dividend of RM3.40. It expects zero growth in the next year. In year 2 and 3, 5 percent growth is expected and in Year 4, 15 percent growth. In Year 5 and thereafter, growth should be a constant 10 percent per year. What is the maximum price per share that an investor who requires a return of 14 percent should pay for HPH common stock? (10 marks)