Question 1 Portfolio valuation
Consider shares in two companies, JAY and KAY, as follows:
Expected Return E(R) 
Standard Deviation 
Correlation Coefficient 

Share JAY  12%  18%  – 0.3 
Share KAY  24%  32% 
a) Calculate the covariance between Share JAY and KAY returns.
b) What is the expected return and standard deviation of returns on a portfolio comprising 35% in Share JAY and 65% in Share KAY?
c) If you wanted to create a portfolio consisting only of these two shares, how much would you need to invest (weights) in each share so that your portfolio return would be equal to 15.6%? Note: do not round.
d) Using the weights calculated in part c), calculate the variance and standard deviation of your portfolio.
Question 2 Bond valuation
Jasmine Ltd is considering issuing bonds to raise funds for a new project. The following three options are being considered.
Bond  Coupon Rate  Coupon/Compounding Frequency  Yield  Term in years  Face Value 
A  0.00%  halfyearly  7.50%  5  $1,000 
B  6.50%  halfyearly  7.50%  10  $1,000 
C  8.40%  Yearly  7.50%  8  $1,000 
a) Calculate the market price of each bond.
b) Classify each bond as either selling at a premium, par or discount.
c) Assume Jasmine has decided to issue only B Bonds. If Jasmine Ltd needs to raise $465,260 how many bonds would need to be issued?
Question 3 Share valuation
Calculate the current market price of each of the following shares assuming a discount rate of 10%.
a) NoChange Ltd is a company with no growth potential. Its last dividend was $4.25, and it expects no change in future dividends.
b) ConstantGrowth Ltd just paid a dividend of $4.25 and it expects its dividend to grow steadily at 4% per year.
c) SteadyGrowth Ltd plans to pay a dividend of $4.25 next year. It expects its dividend to grow steadily at 4% per year.
d) SuperGrowth Ltd just paid a dividend of $4.25 and it expects its dividend to grow quickly at 12% per year for the next three years. It then expects the growth rate to remain constant at 4% per year.
e) QuickGrowth Ltd plans to pay a dividend of $4.25 next year. It expects its dividend to grow quickly at 12% per year for the next three years. It then expects the growth rate to remain constant at 4% per year.
Conclusion
Recommendations
Click on Buy Solution and make payment. All prices shown above are in USD. Payment supported in all currencies. Price shown above includes the solution of all questions mentioned on this page. Please note that our prices are fixed (do not bargain).
After making payment, solution is available instantly.Solution is available either in Word or Excel format unless otherwise specified.
If your question is slightly different from the above question, please contact us at info@myassignmentguru.com with your version of question.