Question 2 (10 marks) Read the scenario below and answer the questions that follow: An investor is tracking Company AA listed on Country Zs stock exchange. The company is in the manufacturing sector and has just paid a dividend of R20 per share. Dividends are expected to grow by 15% per year for the next three years (short-term), and then grow by 6% into perpetuity. The cost of equity for the company is 14%. The companys share is currently trading at a price of R310. In addition, the investor wants to understand investor sentiment on Country Zs stock exchange. The following market information for Country Zs stock exchange is provided at the closing session of a trading day: h Advances: 2 457 h Declines: 748 h Advancing volume: 1 246 h Declining volume: 255. Note: show all calculations and round off your final answers to two decimal places. 2.1 Calculate the intrinsic value of Company AAs share, using the two-stage dividend discount model. (6) 2.2 Determine whether the share of Company AA is overvalued or undervalued. (1) 2.3 Recommend what the investor should do in relation to Company AAs shares. (1) 2.4 Calculate and interpret the Trin statistic. (2)

Question 3 (8 marks) Read the scenario below and answer the questions that follow: An investor purchases a semi-annual 12% coupon paying bond with a par value of R40 000 000, selling at a clean price of R114.90163% on 25 June 2021. Coupon payments are made on 15 March and 15 September, and the register closes 10 days prior to the coupon payments becoming due on 5 March and 5 September. The maturity date of the bond is 15 March 2030. The yield to maturity (YTM) on the bond is 9.5%. The bonds modified duration is 5.97 years. Note: show all calculations and round off your final answers to two decimal places. 3.1 Is the bond trading at par, discount or premium? (1) 3.2 Calculate the current yield on the bond. (1) 3.3 Is the bond trading cum-interest or ex-interest? (1) 3.4 Calculate accrued interest on the bond. (1) 3.5 Determine the all-in price of the bond. (1) 3.6 Calculate the total consideration that the investor should pay. (1) 3.7 What is the percentage change in the bond price if YTM increases by 150 basis points (pts)? (1) 3.8 Interpret the bonds modified duration value of 5.97 years. (1) Question 4 (9 marks) Read the scenario below and answer the questions that follow: An investor is considering investing in money market instruments issued by the government and private sector. She finds a 182-day treasury bill (TB) and a 182- day negotiable certificate of deposit (NCD). The investor requires a discount rate of 6.75% for the 182-day TB, with a nominal value of R5 000 000. The 182-day NCD has also a nominal value of R5 000 000 at an interest rate of 6.75% per annum. 4.1 Determine the price (in rand percentage) that the investor will bid for the TB. (1) 4.2 Calculate the amount by which the TB will be discounted. (1) 4.3 Calculate the consideration amount that the investor will pay on the TB. (1) 4.4 How much is the investor supposed to pay for the NCD? (1) 4.5 How much is the investor going to receive on each investment at maturity? (2) 4.6 Which investment gives a better yield if held to maturity? Justify your answer. (3) Question 5 (13 marks) Read the scenarios below and answer the questions that follow: 5.1 Company XYZs share is currently trading at R85. After analysing Company XYZs share, Investor AA purchases a R95 December call at a premium of R4 per share. One call option contract is made up of 100 shares. On the other hand, after analysing Company XYZs share, Investor BB purchases a R80 December put at a premium of R5.50 per share. One put option contract is made up of 100 shares. Note: show all calculations and round off your final answers to two decimal places. 5.1.1 What could be the reason for Investor AA purchasing the call option on Company XYZs share? (1) 5.1.2 What could be the reason for Investor BB purchasing the put option on Company XYZs share? (1) 5.1.3 Calculate the break-even price per share on the call option. (1) 5.1.4 Calculate the break-even price per share on the put option. (1) 5.1.5 Suppose at expiration, Company XYZs share is trading at R65. Determine the profit or loss on the call and put options. (4) 5.1.6 Suppose at expiration, Company XYZs share is trading at R105. Identify the investor who will exercise the option and not exercise the option. (1) 5.2 Hedge Fund A has R200 000 000 assets under management (AUM) at the beginning of 2020. The annual management fee is 1.5%, charged at the beginning of the year. The performance fee is 20% of the funds performance in excess of the hurdle rate. The hurdle rate is set at 7%. By the end of 2020, the hedge fund achieved a return of 18% after management fees. Note: show all calculations and round off your final answers to two decimal places. 5.2.1 Calculate the management fee for the hedge fund. (1) 5.2.2 Calculate the performance fee for the hedge fund. (1) 5.2.3 Suppose the high-water mark in 2020 is R229 304 000 and the hedge funds AUM at the end of 2021 is R230 000 000. What will be the high-water mark in 2021 and why will this be so? (1)