Lahore Leads University

Department Of Business Administration

Course Title: PORTFOLIO ANALYSIS AND MANAGEMENT

Course Instructor: Dr. MARIA SULTANA

ASSIGNMENT 3
BBA VIII
DATE: 25-03-2021

1. How the zero coupon bond provide returns to investors?

2. Is any mortgage bond or asset backed security necessarily a more secure
investment than any debenture? Comment.
3. What is the purpose of bond ratings? If the bonds ratings are so important to the
investors why don‘t common stock investors focus on quality ratings of the
companies in making their investment decisions?
4. How would you expect interest rates to respond to the following economic events
(what would be the direction of the interest rates changes)? Explain why.
a) Increase in investments;
b) Increase in savings level;
c) Decrease in export;
d) Decrease in import;
e) Increase in government spending;
f) Increase in Taxes.
5. Distinguish between an interest rate anticipation swap and a substitution swap.
6. What is a key factor in analyzing bonds? Why?
7. Distinguish between yield-to-call and yield-to-maturity.
8. What is the difference between the market expectation theory and the liquidity
preference theory?
9. Anna is considering investing in a bond currently selling in the market for 875
EURO. The bond has four years to maturity, a 1000 EURO face value and a 7%
coupon rate. The next annual interest payment is due one year from today. The
appropriate discount rate for the securities of similar risk is10%.
a) Estimate the intrinsic value of the bond. Based on the result of this estimation,
should Ann purchase the bond? Explain.
b) Estimate the yield-to-maturity of the bond. Based on the result of this
estimation, should Ann purchase the bond? Explain

NOTE: SUMIT IT ON OR BEFORE (04-04-2021) after listening lecture 21

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