QUESTION 4 (CLO 4) a) The Hague Court Supplies Company has RM1,000 par value bonds outstanding that pays 14 percent annual interest. The current yield to maturity on such bonds in the market is 18 percent. Compute the price of this bond on the end of the following time period: i) 30 years. ii) 15 years. iii) 1 year. (3 marks) (3 marks) (3 marks) Page 4 of 12 FIN 2013 FINANCIAL MANAGEMENT/FE2021-3 FIN 2013 FINANCIAL MANAGEMENT / FE (Final Exam Assignment) b) Easter Island Biochemical Company has RM1,000 par value bonds outstanding that pays 11 percent annual interest. The current yield to maturity on such bonds in the market is 8 percent. Compute the price of this bond on the end of the following time period: (3 marks) (3 marks) i) 25 years. ii) 10 years. (3 marks) (3 marks) iii) 7 years. iv) 5 years. b) Consider the following information about two stocks where the probability of an economic boom is 40%: Economic State Return A (RA) Return B (RB) Boom 38% 6% Recession -4% 12% Required to calculate: i) The expected return for stock A and stock B. (3marks) ii) The standard deviation of stock A and stock B. (3marks) iii) The correlation of stock A and stock B. (3marks) iv) The total risk (standard deviation) of a portfolio, where 1/8 of your money is invested in stock A, and 7/8 of your money is invested in stock B. Calculate the expected return for both stocks. (3marks)