Finance Calculation - Research Paper Example

This is the factor for the argument and criticism of the Millionaires Factory by the Australian Shareholder's Association. If the market required rate of return is higher than the coupon rate of a bond, the price of the bond goes down. Because there are available bonds in the market, which give more interest than it does. Therefore, investors do not feel interest to invest on the bond, which offers lower interest rate than market's other bond. If the market required rate of return is lower than the coupon rate of a bond, the price of the bond goes up.

Because there are available bonds in the market, which give lower interest than it does. So, investors feel interest to invest on the bond, which offers higher interest rate than market's other bond. . Price of bond at 4% market interest = [80{1-1/ (1+ .04) ^5} .04] + 1000 / (1+.04) ^ 5= $1177.62Price of bond at 6% market interest = [80{1-1/ (1+ .06) ^5} .06] + 1000 / (1+.06) ^ 5 = $1084.20Price of bond at 8% market interest = [80{1-1/ (1+ .08) ^5} .08] + 1000 / (1+.08) ^ 5 = $999.99Price of bond at 10% market interest = [80{1-1/ (1+ .10) ^5} .10] + 1000 / (1+.10) ^ 5 = $684.

66Price of bond at 12% market interest = [80{1-1/ (1+ .12) ^5} .12] + 1000 / (1+.12) ^ 5= $598.42Price of bond at 14% market interest = [80{1-1/ (1+ .14) ^5} .14] + 1000 / (1+.14) ^ 5= $553.20Price of bond at 16% market interest = [80{1-1/ (1+ .16) ^5} .16] + 1000 / (1+.16) ^ 5 = $479.47 In while,1 = 16%2 = 14%3 = 12%4 = 10 %5 = 08%6 = 06%7 = 04%8 = 02%.Relationship between bond value and market required rates of returnIf the market required rate of return is higher than the coupon rate of a bond, the price of the bond goes down.

Because there are available bonds in the market, which give more interest than it does. Therefore, investors do not feel interest to invest on the bond, which offers lower interest rate than market's other bond. If the market required rate of return is lower than the coupon rate of a bond, the price of the bond goes up. Because there are available bonds in the market, which give lower interest than it does. So, investors feel interest to invest on the bond, which offers higher interest rate than market's other bond.

Answer to the question no.6Part 1We know,P = (D + p) / 1 + kIn while,P = Opening share valueD = Dividendp = Closing share valuek = .12g ( growth) = (3.5- 3.24) / 3.24 = 8.02% So, D = 3.5 + 3.5 8.02% = 3.78So now,