question 4

10 If the market's required return on both bonds with par value of RM 1000 is 8%, what are the a) market prices of the bonds? You can assume annual interest payments. 4 marks) b) Is it true that both bonds have the same current yield since they have the same coupon value? 3 Prove it. 4 mar IfAA Bhd bond can be called in 5 years for RM1500, what is its yield to call (YTC)? c) d) 5 marks 4 marks] Explain two factors that affect the bond rating of a company. 4. Kenchana Holding's stock is expected to pay a dividend RM1.00 per share at the end of the year. The dividend is expected to grow 20 percent per year each of the following 3 years, after which time the dividend is expected to grow at the constant rate of 7 percent per year. The firm's required return is 10% [4 marks] 15 marks a) What is the firm's horizon value? b) What is the firm's intrinsic value (Po) today? c) As a smart investor, would you buy the shares of Kenchana Holding if they are sold at RM55 2 13 marks each? Explain your