70.2K

Verified Solution

Link Copied!

a) The stocks of Zambia Sugar Plc. Which have just paid a dividend of K3.24 have a dividend growth rate of 8% on them with a market discount rate of 15%.If you are to buy these stocks what is the most you can pay for each share?

b) Investrust bank Plc. required rate of return is 16% and the dividends are expected to grow at 30% for the next 3years then drop to a constant growth rate of 10% thereafter. The most paid dividend was K1.82 what is the market price of the stock?

c) A stock that was bought for K30.00 a year ago has just paid a dividend of K8.00 and its current market price is K50.00 what will be the total yield on this stock if its growth rate is 12%?

d) Consider a Zambia Sugar Plc. Bond which offers 8% coupon annually and has a face value of K1, 000.

Calculate the yield to maturity (YTM) if the bond has

i. 20 years remaining to maturity and it is sold at K1,200

ii. 10 years remaining to maturity and it is sold at K950

e) Given the two scenarios in (i) and (ii) above, using the yield computed, which of the two relates to a bond sold at a premium

f) Nshimbi steel Limited has issued an 8%, 20 years bond that pays interest semi-annually. If the market prices the bond to yield an effective annual rate of 10%.What is the most you can pay for this bond?

Answer & Explanation Solved by verified expert

See Answer