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What is the present value of the bond

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Reference no: EM132791158

The accountant of COAT Bhd provides you with the following information

PPG Corp KP Corp

Current ROE 12% 8%

Current EPS RM5 RM1.50

Current DPS RM1.80 RM0.50

Current Market Price RM22 RM7

You are required to:

a) compute the dividend payout ratio of PPG and KP.

b) compute the intrinsic value of each stock. (assume the r = 14%)

c) choose the stock you will invest and give reasons.

A. An 8% bond with par value of RM1,000 has 12 years to maturity and is currently traded at RM850. Calculate the bond's yield to maturity. (Use trial and error method)

B. A RM1,000 face value bond with maturity period of 15 years pays 8% coupon rate. This bond was issued 5 years ago. Current interest rate in the market is 10%

i. What is the present value of the bond if the coupon rate is paid semiannually?

ii. If you expect the above bond to be called in FIVE (5) year time, calculate the present value of the bond. Assume coupon rate is paid annually. If the market price is RM1090, would you buy the bond? Why?

Reference no: EM132791158

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