金融市场学——计算+简答(2)

4.A stock just paid a div of $1.The div for the next three yrs is expected to grow at a 30% after which the div in the fourth years and all future yrs is expected to grow at a rate of 4%, if the discount rate is 14%.Calculate the value of the stock?

D1=1*1.3=1.3,

D2=1*1.3^2=1.69,

D3=1*1.3^3=2.197,

D4=D3*(1+0.04)=2.285,

P0=1.3/1.14+1.69/1.14^2+2.197/1.14^3+2.285(14%-4%)(1.14)^-3=19.35

1. The issuance of preference shares is a funding alternative for a corporation. What attributes may the corporation need to consider attaching to the issue to ensure that the preference share is attractive to the market?

Advantages of preference shares:

a. In effect preference shares are fixed interest borrowings,but are an equity finance instrument

b. Assists in maintaining debt to equity radio

c. Widens a company’s equity base,which allows further debt to also be raised.

2. A customer has approached the bank and is seeking to invest funds for a period of six months. The customer is considering lodging the funds in a term deposit or, alternatively, purchasing a negotiable certificate of deposit. Explain the attributes of each investment product to the customer. Why might the CD be a more appropriate investment choice?

A: its rate of interest may be adjusted quickly

B: it can be sold quickly in the money market for cash C: it is a negotiable instrument