Economic Assignment: Bond Issuance, Blue-Chip Stocks, and Stock Valuation Methods

Economic Assignment 1
Economic Assignment
By Student’s Name
Course Title
Professor Name
Institution
Date

Economic Assignment 2
Question 1: [25 marks]
A Malaysian company wants to issue a bond that is redeemable in ten (10) years for its par
value of RM1000. Estimate the annual coupon rate and the price at which the bond should
be issued. Justify your answer. (Hint: you should conduct some research on the existing
coupon rates that take place in the market)
Annual coupon rate is 17%
Yield to maturity (Interpretation of the results in excel)
A bond comprising a market value of RM910, with 1 coupon of 9% annually and its maturity
date is 10 years will have a yield to maturity of 10.50%.
This shows that bond investor do not consider only purchase of freshly acquired bonds but also
prioritize the purchase of other bonds from different investors. Though it depends on how the
bond is purchased in the secondary market whether at a discounted rate or premium which shows
that the actual return rate might be higher or less compared to the yearly quoted coupon rate1. For
this reason most investors should look into the need for YTM since it evaluates the bond’s yield
from the purchase to the maturity date.
1 Pablo Fernández, Valuation Methods And Shareholder Value Creation, 3rd ed. repr., San Diego, Calif.:
Academic Press, 2016.

Economic Assignment 3
Bond price Taking into account the a bond which is required for settling on 10/26/1998
consisting of face value of RM1000 and its maturity date is 10/26/2019, its coupon rate being
9%, and the marketing yield of 11%, then the bond price will be RM217.5206.
The above statement implies that the above stated factors are essential in achieving an
appropriate bond price. The difference of the settlement period and the maturity mainly reveals
the duration of time in possession of the bond (10 years). The bond price will decrease as the
time increases. Thus the market yield is assessed by the coupon’s annual rate with the greater the
difference will thus lead to a lower bond price. Lastly the redemption value is contrasted to the
Face value, the greater the difference, the lesser the bond price value2.
Answered in the excel file
Question 3:
a. Give ONE (1) example of blue-chip stocks listed in the KLCI. Explain what are the
criteria used for determining “blue-chip” stocks.
KLCI blue-chip stocks – Maybank; KLCI weight of 9.40; the free float factor of 75; Stock code;
1155
Due to wide range of factors to select from, being in a position of determining a blue chip stock
is very challenging which requires every investor in employing their own criterion which would
abide by their portfolio strategies. This is why every financial institution always uses available
dividend payments, the earnings growth, interest coverage, and the bond ratings on its debt since
2 Andrea Saravalle, "Methods Of Business Valuation", SSRN Electronic Journal 5, no. 2 (2011): 789-876,