Reference no: EM132908139
In 2004 Valia purchased a 20-year, 1.50% p.a. semi-annual paying coupon bond with a Face Value (FV) of $1 000 000, as she was attracted by the fixed income stream in order to fund her retirement expenses.
a) What is the price of this bond in 2020 (4 years remaining) at a current market interest rate of 2.70% p.a.?
Show formula, variables, calculation, and a concluding statement in your response.
b) Is Valia's coupon bond currently selling at a premium, par, or discount? Describe the relationship between bond prices and interest rates.
c) Valia decided to sell the bond from part a) and is considering her investment options. A friend suggested that she invests the proceeds by buying shares. Explain two advantages shares have compared to bonds.
d) Warren, a Wall Street portfolio manager, informed Valia that she should consider investing in his portfolio instead. He said his fund is perfect for someone who is retired and looking to increase her wealth to fund her retirement lifestyle. His portfolio has the following allocation of assets:
Asset Class Allocation
Shares in Small Companies (High Risk) 60%
Shares in Blue Chip Companies (Low Risk) 30%
Bonds 10%
Cash 0%
Does Warren have a point? Why or why not?
e) Valia decides to pass on $1 000 000 of her savings for her child Tony, who is currently 20 years old. Should Tony invest in mostly bonds, like his Mum? Suggest an option Tony can consider when investing his money. Explain why your choice is appropriate for Tony.
Anti-strategic lawsuit against public participation laws
: In evaluating the truth or falsity of an article, a court will consider. Anti-Strategic Lawsuit Against Public Participation (SLAPP) laws:
|
Acquiring new equipment for the production
: Company A is looking at acquiring new equipment for the production of the Product A, which will cost $7 million and has an estimated useful life of 10 years.
|
What is bad boys inc cost of capital
: If Bad Boys, Inc. raises capital using 45% debt, 5% preferred stock, and 50% common stock, what is Bad Boys, Inc.'s cost of capital?
|
What are advantages of nursing interaction to nursing care
: What were the different methodologies old consideration accomplices utilized for infections? Clarify every one of the methodologies.
|
What is the price of bond
: In 2004 Valia purchased a 20-year, 1.50% p.a. semi-annual paying coupon bond with a Face Value (FV) of $1 000 000, as she was attracted by the fixed income stre
|
Screaming in the happy days day care center
: A city social services agency is reportedly looking into allegations of children crying and screaming in the Happy Days Day Care Center at 1456 Marblehead Way
|
What are the maximum capital allowances can claim
: What are the maximum capital allowances she can claim? Jennifer runs a large business and has a single main pool for capital allowances of plant and machinery.
|
Propose the derivation of the engagement letter
: 1.propose the derivation of the engagement letter and analyze the scope of the audit resolution that can be dissuaded together with it
|
What tax payable will be
: What tax payable will be? Eleanor owns a number of rental properties and has a net taxable property income of £18,480 for the year.
|