Question 3

1. Below is the data for three semi-annual bonds:

Table 2: data for three corporate bonds

Bond	Par Value	Coupon Rate	Years to Maturity	Yield to Maturity
A	RM1,000	8%	10	6%
B	RM1,000	6%	10	8%
C	RM1,000	8%	10	8%

1. Calculate the prices for the above bonds.

(6 marks)

2. Based on the above calculation in (a), find the impact of coupon rate and yield to maturity on the bonds price.

(3 marks)

3. Distinguish between coupon rate and yield to maturity.

(4 marks)

2. Sunshine Icon Berhad currently pays no dividend and reinvests all of its earnings into rapid growth. However, ABC is expected to begin paying dividends in 3 years. The first dividend will be RM 3.00; and will grow at 5% per year; the required rate of return throughout the period is 11%.

1. Deduce the current market price per share.

(5 marks)

2. List THREE (3) key features of common stock.

(3 marks)

3. State and briefly explain TWO (2) main differences between common stock and preferred stock.

(4 marks)

[Total: 25 Marks]