COURSE: FINANCE - STOCKS AND BONDS An investor client asks you to help him to value a portfolio composed of 2 financial instruments (a bond and a stock). In this way client will know maximum amount to pay for this portfolio. At time of requesting your help, you provide him with following information. - Bond was issued 3 years ago under bullet mode and with annual coupons of which first 3 have already been paid, term of issue was 7 years (with four coupons remaining to be paid) with a 7% annual coupon rate and Nominal Value = USD 500,000. - Share corresponds to an energy company that according to estimates will have a 15% growth during first 3 years to grow indefinitely at a rate of 6% per annum from fourth year onwards. Last dividend paid was USD 100. - IRR for both instruments is 10%. Based on above information, answer 2 following questions: a) Calculate price of bond and stock. b) What is value of the portfolio? Explain TECHNICALLY
COURSE: FINANCE - STOCKS AND BONDS
An investor client asks you to help him to value a portfolio composed of 2 financial instruments (a bond and a stock). In this way client will know maximum amount to pay for this portfolio. At time of requesting your help, you provide him with following information.
- Bond was issued 3 years ago under bullet mode and with annual coupons of which first 3 have already been paid, term of issue was 7 years (with four coupons remaining to be paid) with a 7% annual coupon rate and Nominal Value = USD 500,000.
- Share corresponds to an energy company that according to estimates will have a 15% growth during first 3 years to grow indefinitely at a rate of 6% per annum from fourth year onwards. Last dividend paid was USD 100.
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Based on above information, answer 2 following questions:
a) Calculate price of bond and stock.
b) What is value of the portfolio? Explain TECHNICALLY
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