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Assignment Date Start From 29-01-2016 and last date 02-02-2016 

ABC Ltd. is among the biggest and fastest growing companies in Pakistan with a vision to cater local needs with products conforming to global standards. The company has over 12 million consumers all over Pakistan and earned Rs. 43 billion as revenues in year 2014. The company has planned to add another division into dairy business. The project required an amount of Rs. 100 million. The company has multiple financing options including equity as well as debt market. In a presentation about the project and financing options, financial manager has outlined following opportunities from the debt market.

Part A:
Following are the financing options and the economy forecasts.
The interest rates are expected to decline over the next six months.
1. In such an economy outlook where interest rates are expected to decline what kind of bonds in terms of duration (Longer or shorter), company should include in its portfolio. Give reason for your choice.


2. The table shows three sets of non-callable bonds. For each set, select the one bond from each set that would be best for the company while keeping in mind the interest rate outlook and the consequent strategy set forth in Part 1 (selected duration of the bond). In each case briefly discuss why you selected the bond. (see the table in assignment file)

Part B:
ABC Ltd. has also decided to issue 8%, Rs. 1,000 par value bond A with YTM of 10%. It will mature in three years and will pay interest semiannually.
The company has another option of a bond B with duration of 2.30 years and modified duration of 1.43 years.


a. Calculate Macaulay duration and modified duration of bond “A”. Which bond A or B is more suitable for company? Show complete calculations. Give reasons for your answer.

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koi complete solution upload kr do

solution hai kisi k pas?
koi de do solution

1. In such an economy outlook where interest rates are expected to decline what kind of bonds in terms of duration (Longer or shorter), company should include in its portfolio. Give reason for your choice.

as per my suggestion 
company should include in its portfolio a kind of shorter term bonds. due lower interest rate

any suggestion about 2 and 3 

if somebody know about the formulas use in 3 q then tell me about how to calculate

Asif Bhai

Asif Bhai Please tell abount Part A Question 2 about what to calculate

The table shows three sets of non-callable bonds. For each set, select the one bond from each set that
would be best for the company while keeping in mind the interest rate outlook and the consequent
strategy set forth in Part 1 (selected duration of the bond). In each case briefly discuss why you
selected the bond.
Maturity Coupon Yield to Maturity
Set 1: Bond A
Bond B
15 years
15 years
10%
6%
10%
8%
Set 2: Bond C
Bond D
15 years
10 years
6%
8%
10%
10%
Set 3: Bond E
Bond F
12 years
15 years
12%
12%
12%
8%
Part

 

bro koi complete solution upload kr do calculation k sath

In such an economy outlook where interest rates are expected to decline what kind of bonds in terms of duration (Longer or shorter), company should include in its portfolio. 

if company is choosing shorter period.

The table shows three sets of non-callable bonds. For each set, select the one bond from each set that would be best for the company while keeping in mind the interest rate outlook and the consequent strategy set forth in Part 1 (selected duration of the bond). In each case briefly discuss why you selected the bond.

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