Portfolio valuation

Consider shares in two companies, JAY and KAY, as follows

Calculate the covariance between Share JAY and KAY returns.

b)   What is the expected return and standard deviation of returns on a portfolio comprising 35% in Share JAY and 65% in Share KAY?

c) If you wanted to create a portfolio consisting only of these two shares, how much would you need to invest (weights) in each share so that your portfolio return would be equal to 15.6%? Note: do not round.

d) Using the weights calculated in part c), calculate the variance and standard deviation of your portfolio.

Jasmine Ltd is considering issuing bonds to raise funds for a new project. The following three options are being considered

Calculate the market price of each bond.

b) Classify each bond as either selling at a premium, par or discount.

c) Assume Jasmine has decided to issue only B Bonds. If Jasmine Ltd needs to raise $465,260 how many bonds would need to be issued

Calculate the current market price of each of the following shares assuming a discount rate of 10%.

a) NoChange Ltd is a company with no growth potential. Its last dividend was $4.25, and it expects no change in future dividends. 

b) ConstantGrowth Ltd just paid a dividend of $4.25 and it expects its dividend to grow steadily at 4% per year.

c) SteadyGrowth Ltd plans to pay a dividend of $4.25 next year. It expects its dividend to grow steadily at 4% per year.

d) SuperGrowth Ltd just paid a dividend of $4.25 and it expects its dividend to grow quickly at 12% per year for the next three years. It then expects the growth rate to remain constant at 4% per year.

e) QuickGrowth Ltd plans to pay a dividend of $4.25 next year. It expects its dividend to grow quickly at 12% per year for the next three years. It then expects the growth rate to remain constant at 4% per year.

 


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