Question $1$

You are required to answer the following questions by showing relevant workings.

a$.$ Bond $A$ is a premium bond making annual payments. The bond pays an $8\%$ coupon, has

YTM of $6\%,$ and has $15$ years to maturity.

Bond $B$ is a discount bond making annual payments. This bond pays a $6\%$ coupon, has

YTM if $8\%,$ and has $15$ years to maturity.

Bond A and $B$ is having $RM1,000$ face value. If interest rate remains unchanged, compute

the price on these bonds to be in:

i$.$ one year

$(2$ Marks$)$

ii$.{10}^{th}$ year

$(2$ Marks$)$

Based on your computation in part $($a$)($i$)$ and $($ii$),$ interpret your findings.

$(2$ Marks$)$

b$.$ Perdana Berhad just paid a dividend of RM$2\mathrm{.}20$ per share on its common stock. The

dividends are expected to grow at a constant rate of $6\%$ per year indefinitely. If investors

require an $11\%$ return on Perdana Berhad's common stock, find out the common stock

price be in five years.

$(2$ Marks$)$

c$.$ Propel Berhad's common stocks price is growing quickly. Dividends are expected to grow

at $30\%$ per year during the next three years, with the growth rate falling off to a constant

$5\%$ thereafter. If the required rate of return on these common stocks is $13\%,$ and Propel

Berhad just paid RM$2\mathrm{.}50$ dividend, determine the current share price.

$(2$ Marks$)$