Interested in Speculative Holdings - Current Share Price - Accounting and Finance Assignment Help

Assignment Task :

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a) A pension fund must pay out $1 million next year, $2 million the following year, and then $3 million the year after that. If the discount rate is 8%, what is the duration of this set of payments? 
b) You own a bond that has a duration of 6 years. Interest rates are currently 7%, but you believe the Fed is about to increase interest rates by 25 basis points. Your predicted price change on this bond is  

c) You have a 25-year maturity, 10% coupon, 10% yield bond with a duration of 10 years and a convexity of 135.5. If the interest rate were to fall 125 basis points, your predicted new price for the bond (including convexity) is                                                                         

2) You are told by your investment advisor that Laduma Co. is expected to earn R5 per share next year, R6 per share the following year and that thereafter earnings are expected to grow by 8 percent per year.  The dividend payout ratio is 60 percent and the required rate of return on Laduma shares is 15 percent.  If the current share price is R40, would you expect your adviser to make a buy, hold or sell recommendation?  If transaction costs are R2,50 per share, would you follow his advice?                                                                                                        
3)    You are interested in Speculative Holdings which is currently trading at a market price of R4.2 per share. You expect it to achieve earnings next year of R3,420,000 and project a dividend next year of R0.137 per share. The firm has 10 million shares in issue and you estimate that you would requires a return of 12% on this investment. What position would you take on Speculative Holdings?                                                                                                                                                                                                                                      
 

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