Finance Answers

The Notre Dame Model UN club has 20 members. Five are seniors, four are juniors, two are sophomores and nine are freshmen.

a. In how many ways can the club select a president, a secretary and a treasurer if every member is eligible for each position and no member can hold two positions? Blank 1 ways

b. Regardless of the position, what is the probability that 2 juniors and 1 senior will be selected? Blank 2

The Efficient Market Hypothesis (EMH) is a theory that explores the relationship between the availability of information and asset prices. It argues that all available information is already reflected in the price of share and therefore, it is impossible to beat the market over the long-term. Briefly explain the sub-hypotheses in EMH.

Estimating Cost of Capital (WACC)

• What is the book value of debt and equity?

• What are the weights of debt and equity?

• What is the cost of capital?

• What is the weighted average cost of capital for the firm? (Assume tax rate is 35%)

*It is to be done for Apple Inc for the year 2019 and 2020*

Your firm, People’s Consulting Group, has been asked to consult on a potential pre￾ferred stock offering by Brave New World. This 15% preferred stock issue would be

sold at its par value of $35 per share. Flotation costs would total $3 per share.

Calculate the cost of this preferred stock.

RHA fund invested in 1,000 units of 7 percent, 15-year, RM1,000 bond issued by CMX

Bhd. The bond was issued on 1/11/2018 at par. The firm bought the bonds on 1/11/2021

when the bond was selling at 2% discount. The firm intends to sell back all the bond when

the interest rate is expected to be at 5% on 1/11/2026. Throughout the period of holding

the bond, the firm reinvest all the coupons received in an investment alternative that pays

8 percent interest for the 1st 3 years and 9 percent interest for the remaining years. You

are required to assist RHA fund to determine:

i) their total yield from this bond investment

ii) total capital gain from this investment

imi recently inherited some bonds (face value RM100,000) from her father, and soon thereafter she became engaged to Mamat, a Universiti Teknologi MARA, investment graduate.

Mamat wants Mimi to cash in the bonds, so the two of them can use the money for two years in Monte Carlo. The 2 percent annual coupon bonds mature on January 1, 2041, and it is now January 1, 2021. Interest on these bonds is paid annually and new annual coupon bonds with similar risk and maturity are currently yielding 12 percent.

If Mimi sells her bonds today and puts the proceeds into an account which pays 10 percent compounded annually, what would be the equal annual amounts she could withdraw from the account in the said 2 years’ time (2 equal annuity withdrawal amount)

The 12% rate bond of Rs 1,000 face value has a current market value of Rs 1,044.57 and a yield to maturity of 10.8%. Maturity in 5 years. Calculate duration and modified duration

Empire Ltd needs Rs 10,00,000 to build a new factory which will yield EBIT of 1,50,000 per year. The company has to choose between two alternative financing plans. 75% equity and 25% debt and 50% equity and 50% debt. Under the first plan the shares can be sold for Rs 50 per share and the interest rate on the debt will be 14%. Under the second plan shares can be sold for Rs 40 per share and the interest rate on debt will be 16%. Determine the EPS for each plan assuming a tax rate of 35%

En. Iman is the owner of 100 bonds issued by LYC Bhd. These bonds have 8 years remaining to maturity, an annual coupon payment of RM80, and a par value of RM1,000. He purchased the bond 2 years ago when the interest rate was 8.5 percent. Due to the pandemic, the interest rate has fallen by 1.7 percent from it was 2 years ago. Considering this, En Iman decided not to hold the bonds till maturity but to sell it today.

Help him to compute his total capital gain from this investment

The May 17, 2015, price quotation for a Boring call option with a strike price of $50 due to expire in November is $20.80, while the stock price of Boring is $69.80. The premium on one Boring November 50 call contract is ?