Mr. Antony inherited the following securities on his uncle’s death: Types of security No of securities...

Mr. Antony inherited the following securities on his uncle’s death:

Types of security	No of securities	Annual coupon %	Maturity years	Yield %
Bond A (Rs 1,000)	10	12	4	14
Bond B (Rs 1,000)	10	8	7	11
Preference shares C (Rs 100)	100	12	-	14
Preference shares D (Rs 100)	100	13	-	15

Compute the current value of his uncle’s portfolio.

Expert Solution

Period	Discounting Factor [1/(1.14^period)]	Discounting Factor Annuity (Sum of discounting factor & all previous discounting factors)	Discounting Factor [1/(1.11^period)]	Discounting Factor Annuity (Sum of discounting factor & all previous discounting factors)
1	0.877192982	0.877192982	0.900900901	0.900900901
2	0.769467528	1.646660511	0.811622433	1.712523334
3	0.674971516	2.321632027	0.731191381	2.443714715
4	0.592080277	2.913712304	0.658730974	3.10244569
5	0.519368664	3.433080969	0.593451328	3.695897018
6	0.455586548	3.888667517	0.534640836	4.230537854
7	0.399637323	4.288304839	0.481658411	4.712196265

						Value per Security	Total Value [Value per Security*No of Securities]
Type	Par Value	No of Securities	Annual Coupon	Maturity	Yield	Formula	Calculation	Value
Bond A	1000	10	0.12	4	0.14	[Maturity ValueDiscounting Factor]+ [CouponPV Annuity Factor]	[10000.5921]+[(10000.12*2.9137]	941.744	9417.44
Bond B	1000	10	0.08	7	0.11	[Maturity ValueDiscounting Factor]+ [Coupon AmountPV Annuity Factor]	[10000.4817]+[(10000.08*4.7122]	858.676	8586.76
Pref shares C	100	100	0.12	-	0.14	Coupon Amount/Yield	(100*0.12)/0.14	85.71429	8571.428571
Pref share D	100	100	0.13	-	0.15	Coupon Amount/Yield	(100*0.13)/0.15	86.66667	8666.666667
							Value of Portfolio	35242.29524

jeff jeffy answered 1 year ago

Mr. Sudarshan has inherited the following securities: 1. 100 bonds - 11% bonds of Rs.100 each,...

Mr. Sudarshan has inherited the following securities: 1. 100 bonds - 11% bonds of Rs.100 each, maturing after 5 years at par 2. 100 bonds- 13% bonds of Rs.100 each, maturing at par after 4 years 3. 200 Equity shares of XYZ Ltd., face value Rs.100 XYZ Ltd. Pays a dividend of 20% on equity shares and the dividend rate is expected to remain the same. Mr. Sudarshan would like to know the total value of the inherited securities. He...

Mr. Thomas has just inherited $ 1000,000. He could either invest his money in the bank...

Mr. Thomas has just inherited $ 1000,000. He could either invest his money in the bank which gives a return of 4% or invest in shares of Monopoly Corp which is the only company in the market. Shares of Monopoly Corp offer an average return of 12% and a risk of 10%. a) If Mr. Thomas wants a return of 10%, how much money does he need to invest in shares ? b) Calculate the risk of his investment strategy.

Probabilities of Death The US Social Security Administration collects information on the life expectancy and death...

Probabilities of Death The US Social Security Administration collects information on the life expectancy and death rates of the population. Table P.6 gives the number of US men out of 100,000 born alive who will survive to a given age, based on 2011 mortality rates.6 For example, 50,344 of 100,000 US males live to their 80th birthday. (a) What is the probability that a man lives to age 60? (b) What is the probability that a man dies before age...

If you inherited $55,000 today and invested all of it in a security that paid a...

If you inherited $55,000 today and invested all of it in a security that paid a 13 percent rate of return, how much would you have in 20 years? Round the answer to the nearest cent. Round FV-factor to three decimal places. Calculate your answer based on the FV-factor. $ _____ Calculate your answer based on the financial calculator. $ _______ If the average new home costs $270,000 today, how much will it cost in 12 years if the price...

Consider a Tbill with a rate of return of 5% and the following risky securities: Security...

Consider a Tbill with a rate of return of 5% and the following risky securities: Security A: E(r) = 0.15; Standard deviation= 0.2 Security B: E(r) = 0.10; Standard deviation= 0.15 Security C: E(r) = 0.17; Standard deviation= 0.28 Security D: E(r) = 0.13; Standard deviation= 0.25 If an investor wants to use the risk-free asset and one of the risky assets to form a complete portfolio, which risky asset should the investor choose? Group of answer choices Security B...

After the death of Lennie Pope, his will was read. It contained the following provisions: $150,000...

After the death of Lennie Pope, his will was read. It contained the following provisions: $150,000 in cash goes to decedent’s brother, Ned Pope. Residence and other personal property go to his sister, Sue Pope. Proceeds from the sale of Ford stock go to uncle, Harwood Pope. $380,000 goes into a charitable remainder trust. All other estate assets are to be liquidated with the cash going to Victoria Jones. a. Prepare journal entries for the following transactions that subsequently occur:...

At the time of his death Jason had the following assets: • Home owned jointly with...

At the time of his death Jason had the following assets: • Home owned jointly with rights of survivorship with his wife Sally, valued at $500,000. • Stock account in his individual name, valued at $250,000. • Life estate received from his mother, Judy, in a family vacation home. The home is worth $1,000,000. Jason’s sister Toby is the remainder beneficiary. • IRA worth $750,000. His wife Sally is the primary beneficiary. Who will receive the family vacation home?

Which of the following is/are NOT corporate monitors? A. Lenders B. Security analysts C. Securities and...

Which of the following is/are NOT corporate monitors? A. Lenders B. Security analysts C. Securities and Exchange Commission D. All of the above are corporate monitors.

Use the SML to determine the required rate of return for the following securities: Security 1...

Use the SML to determine the required rate of return for the following securities: Security 1 has a beta of 5, Security 2 has a beta of 0.5. The risk free rate is 0.025 and the market required rate of return is 0.1 Suppose that the expected rate of return for Security 1 is 0.13 and the expected rate of return for Security 2 is 0.10. Explain what happens in this market, if anything. Suppose that the required rate of...

What types of things do you want to teach or reinforce with Mr. Jones regarding his...

What types of things do you want to teach or reinforce with Mr. Jones regarding his lifestyle?

Question