4FMG-1_041140597_-TMA-2.docx - BBF302/05 Financial Management and Analysis Date of submission Name IC no Student ID H/P no Tutorial Tutor On date Late

# 4FMG-1_041140597_-TMA-2.docx - BBF302/05 Financial...

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BBF302/05 Financial Management and Analysis Date of submission [ ] On date [ ] Late Name KHOR HAO YUN IC no. 941222-07-5556 Student ID 041140597 H/P no. 017-4488422 Tutorial 4FMG1 Tutor SHAMINI AP SRIRENGAM

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QUESTION 1 (a) PALMA co Zico co Rex co PMT= 1000x 7.8%= 78 N= 10 I=6 FV=1000 PV=1132.48 PMT= 1000x7.5%=75 N= 17 I=9 FV=1000 PV=871.85 PMT= 1000x 7.957%=79.75 N= 4 I=8 FV=1000 PV=998.58 QUESTION 1(b) PALMA co Zico co Rex co PMT=78 FV=1000 PV=-1030 N=10 I=7.37 PMT=75 FV=1000 PV=-973 N=17 I=7.79 PMT=79.75 FV=1000 PV=1035 N=4 I=6.94 QUESTION 1( c )(i) PALMA co Zico co Rex co PMT= 1000x 7.8%= 78 N= 10 I=9 FV=1000 PV=922.99 PMT= 1000x7.5%=75 N= 17 I=12 FV=1000 PV=679.62 PMT= 1000x 7.957%=79.75 N= 4 I=11 FV=1000 PV=906.15 QUESTION 1( c )(ii) PALMA co Zico co Rex co PMT= 1000x 7.8%= 78 PMT= 1000x7.5%=75 PMT= 1000x
N= 10 I=3 FV=1000 PV=1409.45 N= 17 I=6 FV=1000 PV=1157.16 7.957%=79.75 N= 4 I=5 FV=1000 PV=1105.49 QUESTION 1 (d) Interest rate risk also call market risk or price risk. It refer to the possibility of your income or capital loss will occur in your investment due to the changes in the level of interest rate that consequently affects bond price. Premium bond or discount bond is refer to a bond whether sell above or below its par value. Premium bond is selling above its par value while discount bond is selling below its par value. For example, Palma co and Rex co both having RM1000 as par value but it sell at RM1030 and Rm1035. Thus, it is Premium bond. In another side, Zico selling at RM973 and its par value is RM1000. Thus, it is discount bond. In addition, value of bond can affect used to differentiate premium or discount bond. For example, palma co the true value of bond after increase 3% in required rate of return means 9% is 922.99 and the bond currently selling at RM1030. Therefore, it is not worth to purchase due to the bond is considered as “overvalued”. This could represent that current market price (RM1030) is expensive since the true value of bond should be at 922.99. On the other hand, Zico co having 679.62 true value with 12% required rate of return, but it selling at RM973. Thus, it is worth to buy since it is still cheap in market. QUESTION 1 (e) Palma co Zico co Rex co PMT =78 PMT=75 PMT=79.75

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FV = 1000 N=10 I=6 (assuming current market interest is 6%) Bond price(PV)=1132.48 (- shall be ignored and same for next solution) CF0=0 CF1=78x 1= 78 CF2= 78 x2 =156 CF3= 78 x 3=234 CF4= 78 x 4=312 CF5= 78 x 5=390
• Winter '16
• Winnie Wong
• Rex Co

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