What is the estimated value of a stock
(WEEK 9 AND WEEK 10):a) What is the estimated value of a stock, which intended to pay the nextdividend of $2.50, expects dividends to grow at 10 per cent, and requires a 15per cent return?b) Discuss five main points that differentiate forward and future markets.c) Two companies each have comparative advantage in different market. Thefollowing quotes are available:BBB CompanyAAA company Fixed rate5.9% pa5.5% pa Floating rateLIBOR + 0.95% paLIBOR + 0.25% pa Construct a vanilla swap which two third of interest saving go to AAA and onethird of interest saving go to BBB.(WEEK 8):A highly rated corporation has issued $1 million of bonds, with a fixed-interestcoupon equal to current interest rates of 13 per cent per annum, coupons paidhalf-yearly and a maturity of seven years. (10 marks)a) What amount would the corporation have raised on the initial issue of thebonds?b) After one year, yields on identical types of securities have fallen to 12 per centper annum. The existing bond now has exactly six years to maturity. What isthe value, or price, of the existing bond in the secondary market?c) Explain why the value of the bond has changed.
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