Question A2

Required:

(a) A bond has a current yield of 9% and a yield to maturity of 10%. Briefly explain whether the bond is selling at premium or discount. (4 marks)

(b) Name any FOUR examples of money market instruments. (4 marks)

(c) Ubye Limited just paid a dividend of $1.10 per share. The dividends are expected to grow at a 20 percent rate for the next four years and then level off to a 4 percent growth rate indefinitely. Determine its intrinsic value if the required return is 12 percent. (6 marks)