Question No. 6

a. Suppose, the market price of a bond is 17,700 with a face value of 20,000. Bond will pay interest at 6% per annum for 5 years. The bond is callable in 4 years at a call price of 19,000. What is bonds yield to call?

b. A company has a book value per share of BDT 120. Its return on equity is 9% and follows a policy of dividend payout ratio of 60% every year. If the opportunity cost of capital were 11%, what would be the price of the share today?