subejct : Security analysis and portfolio management

The Shamrock Corporation has just issued a Rs 1,000 par value 8% coupoh bond with an 8 percent yield to maturity, due to mature 3 years from today a) What would be the issue price of this bond? b) If the coupon rate was 8% pa (Rs 1,000 par value, 3 years to maturity) and the bond was issued at Rs 940, what would be the annual YTM? (assume semiannual compounding) c) If the coupon rate was 8% pa (Rs 1,000 par value, 3 years to maturity) and the annual YTM dropped to 7\%, how would the market price of the bond be affected (assuming annual coupon payments)? Explain. (Marks: 1+3+2) Shamrock's shares are currently trading at Rs 1000 in the market. The company has consistently maintained a dividend payout ratio of 40% and has an expected earning of Rs 150 per share. The growth rate is expected to be 6%. The cost of equity of Shamrock is 12%. d) How would the market price of Shamrock change if the company announces that it plans to pay its entire earnings as dividend and does not plan to reinvest anything? e) Your friend, who has bought the shares of Shamrock recently is confused looking at your calculations. He asks you why Shamrock's price would increase when the company is not reinvesting anything Can you explain the reason to your friend? (Marks: 2+3)