Question 3 On January 2nd, 2020, you interned with a family office under the supervision of the Chief Investment Officer (CIO). Some bankers approached the CIO for a bond offering of company C. The bankers provided a term sheet with the following information:

Offering price range: 90% to 95% of par

Bond par value: $1000

Minimum subscription: $100,000

Coupon rate: 5%,

semi-annual payment Tenor: 10 years

(a) Using Excel, calculate the implied range of Yield to Maturity (YTM) of the offering. Display your answer to 2 decimal places.

After one month of marketing, the bond sales finally settled at 95% of par. After six months, you returned to the family office for a second internship. On July 1st, 2020, right after the semiannual coupon payment, you observe that the bond is trading at a YTM of 6.0%.

(b) Calculate the latest bond price and the total holding period return in percentage terms. Analyze the total holding period return in dollar terms is defined as the net of capital gain and interest income for a holding period. The return in percentage terms is an expression that is relative to the bond price at the start of the holding period. Display your answer to two decimal places.

During this second internship, the same company C came to raise capital to support its expansion. You collected fundamental data of the company C from its public disclosure as follows:

Revenue last year: $2200 million

Net profit last year: $150 million

Earnings per share last year: $3.0/share

Dividend paid last year: $2.0/share

Dividend payout ratio: 66.67%

DPast-three-year dividend payout growth rate: 15%

(c) You were asked to use a two-stage dividend discount model (DDM) to price the company's share. Upon consulting the CIO, you decided to apply the past-three-year dividend payout growth rate to the next 5 years. After that, the constant growth rate would be 2%. For the discounting, you used a 10% required rate of return.

Develop the cashflow model in Excel and show the timeline chart to depict the dividend distribution of the company over the first1 0 years and calculate the intrinsic value of the company's share.

(d) You were tasked to do an investment memo on company C's debt and equity. You observe that the C's share is trading at $45.5/share. Besides making investment recommendations on the company's debt and equity on a relative basis, you should also compare the pros and cons of the respective investments, touching on the issues of risk and return.