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College of Administrative and Financial Sciences Assignment 2 Principles of Finance (FIN101)

College of Administrative and Financial Sciences

Assignment 2

Principles of Finance (FIN101)

Deadline for students: End of Week 11 (20/11/2021@ 23:59)

Course Name: Principles of Finance

Student’s Name:

Course Code: FIN101

Student’s ID Number:

Semester: 1st


Academic Year: 1442/1443 H, First Semester

For Instructor’s Use only

Instructor’s Name:

Students’ Grade:

Level of Marks:


This assignment is an individual assignment.

The Assignment must be submitted only in WORD format via the allocated folder.

Assignments submitted through email will not be accepted.

Students are advised to make their work clear and well presented. This also includes filling in your information on the cover page.

Students must mention question numbers clearly in their answers.

Late submitted assignments will NOT be entertained.

Avoid plagiarism; the work should be in your own words; copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.

All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).

Submissions without this cover page will NOT be accepted.

Course Learning Outcomes-Covered

CLO2: Apply the concepts of time-value-of-money to determine the valuation of bonds and stocks.

CLO5: Evaluate cost of capital for decisions related to financing the operations of a corporation.

Assignment Questions: (Marks: 05)

Q1. NTL Company is issuing eight-year bonds with a coupon rate of 6.5 percent and semiannual coupon payments. If the current market rate for similar bonds is 8 percent, what will be the bond price? If the company wants to raise $1.25 million, how many bonds does the firm have to sell? 1 mark

Q2. Suppose a 3-year bond with a 6% coupon rate that was purchased for $760 and had a promised yield of 8%. Suppose that interest rates increased, and the price of the bond declined. Displeased, you sold the bond for 798.8 after having owned it for 1 year. What is the realized yield? 1 mark

Q3. Ahmed is interested in purchasing the common stock of Inch, Inc., which is currently priced at $ 40. The company is expected to pay a dividend of $3 next year and to grow at a constant rate of 8 percent. 1 mark

a. What should the market value of the stock be if the required rate of return is 15.75 percent?

b. Is this a good buy? Why or why not?

Q4. Briefly compare the NPV​, PI​, and IRR criteria. What are the advantages and disadvantages of using each of these​ methods? 2 marks

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