MGT201 Assignment No. 2 idea solution
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MGT201 Assignment No. 2 idea solution
Question # 1
Current investigation has gathered the following financial data from ABC Company. You are required to calculate the following:
Bond: Calculate the value of a Rs. 5,000 (par value) bond paying interest at an
annual coupon interest rate of 10% with 10 years maturity and the required return on similar-risk bonds is currently a 12% annual rate paid annually.
Common stock: Company has recently paid annual dividend of Rs.1.50 per common share this year. The Company expects earnings and dividends to grow at a rate of 7% per year for the anticipated future. What required rate of return for this stock would result in a price per share of Rs. 32?
Question # 2
Using the basic equation of capital asset pricing model (CAPM), solve followings for the unknown.
1. Find the risk free rate of return with a required rate of return of 18% and a beta of 1.50 when the market return is 16%.
2. Find the beta for a stock with a required rate of return of 15% when the risk free rate of return and market risk premium are 10% and 2.5% respectively.
(Show complete calculations and provide all formulas as they carry marks)
Last Date of this assignment is June 13, 2011.
Current investigation has gathered the following financial data from ABC Company. You are required to calculate the following:
Bond: Calculate the value of a Rs. 5,000 (par value) bond paying interest at an
annual coupon interest rate of 10% with 10 years maturity and the required return on similar-risk bonds is currently a 12% annual rate paid annually.
Common stock: Company has recently paid annual dividend of Rs.1.50 per common share this year. The Company expects earnings and dividends to grow at a rate of 7% per year for the anticipated future. What required rate of return for this stock would result in a price per share of Rs. 32?
Question # 2
Using the basic equation of capital asset pricing model (CAPM), solve followings for the unknown.
1. Find the risk free rate of return with a required rate of return of 18% and a beta of 1.50 when the market return is 16%.
2. Find the beta for a stock with a required rate of return of 15% when the risk free rate of return and market risk premium are 10% and 2.5% respectively.
(Show complete calculations and provide all formulas as they carry marks)
Last Date of this assignment is June 13, 2011.
good luck- Monstars
- Posts : 29
Join date : 2011-02-11
Re: MGT201 Assignment No. 2 idea solution
Question 1 solution
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a4ask- Monstars
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Posts : 12
Join date : 2011-06-13
Age : 34
Re: MGT201 Assignment No. 2 idea solution
Question 2 solution
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a4ask- Monstars
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Posts : 12
Join date : 2011-06-13
Age : 34
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