Reference no: EM133025216
QUESTION 1 - A. Orient Express Bhd has successfully secured a new project in Nusa Jaya. Mr. Johnny, a Finance Director, proposes to issue 100,000 units of a new bond at net issue price less discounted value to finance the project.
The discount rate is estimated to be 5% of the par value. The new bond, which has a par value of RM1,000, and a ten-year maturity period, will pay a 10% annual coupon. Recently, the company received a rating "AA" from Malaysian Rating Corporation Bhd on the bond issued.
Required -
i) Determine the yield to maturity of the new bond assuming the interest is payable on a yearly basis.
ii) Assuming Bank Negara is expected to announce a cut on the overnight policy rate, explain its impact on the Finance Director's proposal.
QUESTION 2 - Suppose in March 2021, a palm oil producer Mr. Ken anticipates having a harvest of 500 metric tons of crude palm oil (CPO) in three months. Mr. Ken will only have CPO to deliver in June 2021, so he can afford to wait until then to sell his CPO on the spot market for immediate delivery. Pursuing this course of action is risky, as the price of CPO in June 2021 can easily fall as well as rise. Mr. Ken is searching for a suitable hedging strategy to manage the price risk on his anticipated harvest.
As an appointed broker, you need to advise Mr. Ken why a futures contract is an excellent hedging tool for his situation.
Wazee is an investor that owns a share portfolio valued at RM3 million with an estimated beta of 1.20. After a consultation with a trading analyst, she decided to hedge her portfolio against any unforeseen downturn in the equity market. During the consultation, the analyst suggests that there is a strong indicator that the market is highly volatile, and the negative market sentiments may lead to unfavorable market movement. Currently, the FBMKLCI is at 1760 and May FKLI is trading at 1775.
Required - Suppose in May, the market falls by 130 points and May FKLI closes at 1560. Calculate the impact of the hedging strategy on her portfolio value if she hedged her portfolio by 80% using futures.
|
What is free cash flow to equity
: Assume the following: OCF = 30,000, NWC this year end = 10,000 and NWC last year end = 8,000. What is free cash flow to Equity
|
|
Describe any three roles of a team leader
: It is recommended that you set and communicate the performance standards for the completion of each task to be assigned to your team. State your reasons for agr
|
|
Present all journal entries to be prepared
: Present all journal entries to be prepared, in proper format, in 20X1 in order to record all of the warranty related transactions and adjustments for 20X1
|
|
What are institutional voids
: Consider the readings from Khanna and Palepu, Anaya et al., World Bank, Porter etc.. Free Markets are closely associated with economic freedom and a capitalist
|
|
Calculate the impact of the hedging strategy
: Suppose in May, the market falls by 130 points and May FKLI closes at 1560. Calculate the impact of the hedging strategy on her portfolio value
|
|
Key points for consideration for professional recreation
: Question 1: What are the key points for consideration for professional recreation/sport programmers??
|
|
How much is the consignment income
: The goods cost P450,000 and normally are sold at a 40% markup on cost. How much is the Consignment Income (Loss)
|
|
What is hudson free cash flow for common equity shareholders
: Net Increase in Cash Required for Liquidity $80,000. What is Hudson's free cash flow for common equity shareholders in 2018
|
|
Discuss risk identification techniques
: Please discuss risk identification techniques and the main risk categories that are commonly recognized in the majority of projects, regardless of their scope.
|