Question 1:

Using semi-annual compounding, calculate the price of a 15-year bond which has a coupon of 10.5% and is priced to yield 8%. The bond has a par value of $1,000.

Question 2:

Assme you are given the following financial information:

Net profit margin is 15%;

Total assets is $25 billion;

EPS is $3.00;

Total asset turnover is 1.5;

Net working capital is $3.4 billion;

Payout ratio is 40%;

Current liabilities is $5 billion;

P/E ratio is 12.5.

Please calculate: Sales, Net profits after taxes, Current ratio, Market price of the stock, and Dividend yield.

Question 3:

1. With the aid of a diagram, discuss the financial risks of investing in the Credit Linked Note (CLN) in the case of Minibond Series 27 offered by Lehman Brothers Asia Ltd. In Hong Kong.
2. Should we allow the mini-bonds to be sold to retail investors in Hong Kong? Evaluate the potential risks for the bank to offer the structured financial products to Hong Kong retail investors.
3. Examine the systematic risk of 2008 financial tsunami by using an example of 'too big to fail' financial institution.