国际交换学院FIN第一次.doc

Question 1 According to the subject, the FVn is $1000, the year is 8 and the coupon rate is 8.0% and pays interest twice per year. Its most recent coupon of $40.00 has just been paid. The present value of the interest-payment annuity is given by substitution in equation PV= PMT1-1+i-ni, PV= PMT(PVIFAi,n) and the present value of the maturity value is given by substitution in equation PV=FVn1+in , PV = FVn(PVIFi,n). So it could be calculated: I = jm= 8%2 = 4% N = mt = 2×8 = 16 PV = PMT1-1+i-ni ＋ FVn1+in = PMT(PVIFAi,n)+ FVn(PVIFi,n) = $40×(PVIFA4%,16)+$1000×(PVIF4%,16) = $40×11.652+$1000×0.534 = $ 466.08 + $534 = $1000.08 At the required annual bond yields of 8%, today’s price of the bond is $1000.08 I = jm= 7.5%2 = 3.75% N = mt = 2×8 = 16 Pv = PMT1-1+i-ni ＋ FVn1+in = $40 × 1-1+3.75%-163.75% ＋ $10001+3.75%16 = $40 × 1-0.55480.0375 + $10001.8027 = $40 × 11.872 + $554.8773 = $1029.7573 At the required annual bond yields of 7.5%, today’s price of the bond is $1029.7573 I = jm= 8.5%2 = 4.25% N = mt = 2×8 = 16 Pv = PMT1-1+i-ni ＋ FVn1+in =$40 × 1-1+3.75%-163.75%＋ $10001+4.25%16 = $40×1-0.5130.0425 ＋ $10001.9463 = $40×11.459 + $513.7954 = $972.1554 At the required annual bond yields of 8.5%, today’s price of the bond is $975.1554. According to the aftermath, we could find when the required annual bond yields increased, the price of the bond decreased. Question 2 Estimate the expected future cash flows from share ownership. Since the $0.40 dividend has just been paid, we need to estimate the dividend amount to be received amount to be received at the end of the first period. With a 4% per annum growth rate of dividends, D1 is expected to be 4% more than the previous dividend amount of D0. D0 = $0.40 g = 4% RE = 14% D1 = D0(1+g) = $0.40×(1+ 4%) = $0.416 Estimate the required rate of return which is 14% after assessing the riskiness of the the expected cash flows. VE = D1RE-g = $0.41614%-4%= $4.16