Fashion Trends PH is seeking to borrow money to finance the development of its online retailing business using private bonds. These pay no interest during their life but a larger sum on maturity than was originally borrowed. It is offering investors a return of 100,000 after 15 years for every 40,000 loaned. An appropriate risk-adjusted interest rate is 6 percent. Is this a good deal for investors? Explain your answer
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- Time value of money practice problems. How would you solve these using a financial calculator? What values would you enter for N, I/YR, PV, PMT, and FV ? *assume coporate bonds pay 2x annually and have a FV on $1000 b) What is the PV of a 20-year corporate bond issued 5 years ago paying a 5% interest rate when similar bonds today pay 4.5%?A company needs ghc1000 to finance its activities. The firm can finance this expenditure either by bonds or equity. Interest rate on bonds is 10%. The company can earn ghe 160 in good years and ghc80 in bad years. Assuming the firm faces one-quarter probability of good years; What will be the stream of returns on both bonds and equity if the company chooses the following financing options? i. a. 100% equity financing ii. 50% equity financing iii. 20% equity financing iv. 0% equity financing Estimate the equity risk associated with each option in (a) As an investor who wants to purchase a share in the company, which financing option will make you purchase the stock. Why? b. C.QUESTION a. As part of your company’s financial planning, you plan to buy a car for your newexecutive, which costs RM70,000. You have RM3,000 to invest as a lump sum today.You are a conservative investor and only invests in safe products. After approachingdifferent banks, you are offered the following investment opportunities: i. Mija Bank’s savings account with an interest rate of 10.8% compounded quarterly.ii. Miju Bank’s savings account with an interest rate of 11.5% compounded annually.iii. Miji Bank’s savings account with an interest rate of 9.3% compounded monthly.How long will it take for you to accumulate enough money to buy the car in each of theabove three cases? b. Laila Ahmad, the financial manager for Tangga Kejayaan Incorporation, wishes toevaluate three prospective investments: A, B, and C. Laila will evaluate each of theseinvestments to decide whether they are superior to investments that his companyalready has in place, which have an expected return of 15% and a…
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