Question 2 (a) Petronas Inc. has just issued a 15-year, 12% coupon interest rate, $1,000-par bond that pays interest annually. The required return is currently 14%. Required: (i) What the market price for above bond? (3 marks) (ii) What is the market value if required return decreases to 12%? (2 marks) (iii) If you are expecting that the market interest rate will drop in the near future to 10%, how will bond value change? (3 marks) (b) Find the value of stocks for following companies: (i) Candy company will pay a dividend of $0.72 next year. The CEO of the company declared that the company will maintain a constant growth rate of 7% per year very year from now on. How much will you pay for the stock if your required return is 10%? (2 marks) (ii) A healthcare company paid a dividend of $3.40 last year. It expects zero growth in the next year. In years 2 and 3, 5% growth is expected, and in year 4, 15% growth. In year 5 and thereafter, growth should be a constant 10% per year. What is the maximum price per share that an investor who requires a return of 14% should pay for the common stock? (12 marks) (c) Describe efficient market hypothesis (EMH). (3 marks) [Total: 25 Marks]