FIN630 - Assignment 2 - Solution - Spring 2011 - June 2011

[paki daramas]

Question #01
Regional textile issued a 10-year Rs. 500 par value bond at 12% coupon rate (assuming semiannual interest payments). Required rate of return for such investment is 10%.
Pesco textile issued a 15-year Rs. 500 par value bond at 16% coupon rate (assuming semiannual interest payments). Required rate of return for such investment is 12%.
You are required to calculate:
• Coupon payment in each case
• No. of coupon payments in each case
• Value of each bond

Coupon payment in each case:
Because the coupon payments are semi-annual, divide the coupon rate in half. The coupon rate is the percentage off the bond's par value. As a result, each semi-annual




Question #02
Suppose you have following stocks in your portfolio:
1. Stock A which was purchased 11 months ago for Rs. 750, currently selling for Rs. 790and has paid Rs.20 dividend.
2. Stock B which was purchased 5 months ago for Rs. 900, currently selling for Rs. 910 and has paid Rs.15 dividend.
You are required to calculate:
1. Holding period return of stock A
2. Holding period return of stock B
3. Annual return for both stocks