PRBF010 Assignment Sem 2 2015(2)-1

7/18/2019 PRBF010 Assignment Sem 2 2015(2)-1

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Major Assignment PRBF010 – Aspects of Corporate Finance

Semester 2, 2015 Maximum Mars! "5

#P$ease s%o& 'our ca$cu$ations c$ear$'(

Instructions:

Please use excel spreadsheet wherever appropriate. If you useexcel spreadsheets, please copy and paste them into MSWord.

Once you have completed the assignment, it needs to belodged in the Assessments section of Learnline. Yourassessments must be lodged using MSWord. PDF, Excel orpaper copies will not be accepted.

Required:

! "a#e sure your entire assignment can be readily printed on A$%paper in portrait &preferred! or landscape format with

appropriate page brea#s. 'o not have a portion of a (wide)wor#sheet expand beyond page.

*! "a#e sure your name and student number are on every page of your submission.

Ethics:

+his is not a group assignment it is an individual assessment. Your solutions will li#ely be di-erent from other students. Ifportions of your assignment are copied or very close tocopying, all parties will be penalised for copying. opying wouldbe considered plagiarism and '/ has strict policies. It is up toyou to #eep your assessment con0dential.



Q. !"otal Mar#s: $%

You are now 12 years old and plan to retire at the age of 34. Youcurrently have a share portfolio worth 512,222, asuperannuation fund worth 5*12,222 and a money mar#etaccount worth 512,222. Your share portfolio is expected toprovide you annual returns of *6, your superannuation willearn you 7.16 annually and the money mar#et account earns3.*16, compounded monthly.

Required:

a! If you do not save another cent, what will be the total value ofyour investments when you retire8

&"ar#s9 :.*1!

b! Assume that your superannuation contribution is 5*,222 peryear for the next 1 years &starting year from now!. ;owmuch will your investments be worth when you retire8

&"ar#s9 *.1!

c! Assume that you expect to live *: years after you retire &untilage 72!. +oday, at age 12, you ta#e all of your investments andplace them an account that pays <6 annually &use the scenariofrom part b! in which you continue saving. If you start

withdrawing funds starting at age 34, how much can youwithdraw every year and leave nothing in your account afterthe *:rd = 0nal withdrawal8

&"ar#s9 <.1!

d! At age 34, you want your investments, which are described inthe problem statements above, to support a perpetuity thatstarts a year from now. ;ow much can you withdraw each yearwithout touching your principal &at <6 per year!8



&"ar#s9 :.41!

Q. & !"otal Mar#s: '%>attyl ?roup Ltd has <$year bonds outstanding. +hese bonds,which pay semiannual coupons, have a coupon rate of 7.:41per cent and a yield to maturity of 4.71 per cent.

Required:

a! alculate the bond@s current price.&"ar#s9

*.*1!

b! If the bonds can be called after 1 more years at a premium of:.16 over the par value, what is the investor@s realied yield8

&"ar#s94.*1!

c! If you bought the bond today = sold it a year later, what is your

expected rate of return8 &"ar#s93.1!

Bxplain in your own words.

&"ar#s9:!

Q. ( !"otal )ar#s: $%

>hat would be the e-ect on the price of bonds of

a! an unexpected rise in interest rates, and

&"ar#s9 *.1!

b! An unexpected fall in interest rates8



&"ar#s9 *.1 !

c! >ould these interest rate changes have a similar e-ect on the

price of shares8

&"ar#s9 :!

Explain in your own words.

OC+B+ A"DEIF; GOE ;BLP H2271<*7%2733

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PRBF010 Assignment Sem 2 2015(2)-1