Based on the information above: ii. Chris Johnson fund managers has proposed him to invest on Jigsaw Berhad where the firm is setting the terms on a new issue of bonds with warrants. The bonds will have a 30-year maturity and annual interest payments. Each bond will come with 20 warrants that give the holder the right to purchase one share of share per warrant. The fund manager estimate that the value of each warrant will be RM10.50. The interest rate is 10 percent. Calculate the coupon rate should be set on the bonds-withwarrants so that the package would sell for RM1,000.
Based on the information above: ii. Chris Johnson fund managers has proposed him to invest on Jigsaw Berhad where the firm is setting the terms on a new issue of bonds with warrants. The bonds will have a 30-year maturity and annual interest payments. Each bond will come with 20 warrants that give the holder the right to purchase one share of share per warrant. The fund manager estimate that the value of each warrant will be RM10.50. The interest rate is 10 percent. Calculate the coupon rate should be set on the bonds-withwarrants so that the package would sell for RM1,000.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Based on the information above:
ii. Chris Johnson fund managers has proposed him to invest on Jigsaw
Berhad where the firm is setting the terms on a new issue of bonds with
warrants. The bonds will have a 30-year maturity and annual interest
payments. Each bond will come with 20 warrants that give the holder the
right to purchase one share of share per warrant. The fund manager
estimate that the value of each warrant will be RM10.50. The interest rate
is 10 percent. Calculate the coupon rate should be set on the bonds-withwarrants so that the package would sell for RM1,000.
Transcribed Image Text:2.
(a) Chris Johnson has observed Kayangan Industries Berhad and Hartalega
Holding Berhad share on the Bursa Malaysia Derivatives market. He is
interested to invest in those shares, and he has proposed to the fund manager
to analyze which investment should he invest. The information for those shares
is as follows:
(i) Kayangan Industries is currently trading at RM55 per share and does not
pay dividend with the volatility of 35 percent. The current risk-free rate of
interest is 11 percent with a strike price of RM53 that expires in five
months.
(ii) Hartalega Holding has a share price at RM26.70 and it is expected to pay
a dividend of RM0.80 per share in May 2021. The strike price is RM28.50.
The risk-free interest rate is 15.3 percent per annum and the variance is
8.6 percent. The share will expire in 1 year 3 months.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education