business finance 1 final exam
COURSECODE: BCO 212 COURSE NAME: Business Finance 1 Task brief & rubrics
Task: EXERCISE 3
Details of the task:
individual
answer the questions below
Submission: one file
Formalities:
Wordcount: no more than 900 words.
Cover, Table of Contents, References and Appendix are excluded of the total wordcount.
Font: Arial 12,5 pts.
Text alignment: Justified.
The in-text References and the Bibliography have to be in Harvard’s citation style.
Submission: TBA
Weight: This task is a 33.3% of your total grade for this subject.
It assesses the following learning outcomes:
To be able to apply the concept of time value of money
Apply financial models of annuities and perpetuities
Exercise 1 (20 points):
Compute the price of the following bonds:
Bond A: Coupon bond, 2% coupon paid semi-annually, with maturity of 12 years.
Bond B: Zero coupon bond with maturity of 6 years.
Bond C: Coupon bond, 5.75% coupon paid yearly, with maturity 20 years.
Assume that all 3 bonds have the same nominal: 1000 euro.
Your required rate of return is the same for each bond and equal to 5%.
Exercise 2 (30 points):
Compute yield-to-maturity for the following zero-coupon bonds:
1-year zero-coupon bond, traded currently at 990 dollars
2-years zero-coupon bond, traded currently at 950 dollars
3-years zero-coupon bond, traded currently at 890 dollars
Assume that all 3 bonds have the same nominal: 1000 dollars.
Using YTMs calculated plot the yield curve.
Exercise 3 (50 points):
Procter & Gamble will pay an annual dividend of $0.65 one year from now. Analysts expect this dividend to grow at 12% per year
thereafter until the fifth year. After then, growth will level off at 2% per year. What is the value of a share of Procter & Gamble
stock if the firm’s equity cost of capital is 8%?
Rubrics:
Exceptional 90-100 Good 80-89 Fair 70-79 Marginal fail 60-69
Knowledge &
Understanding
(20%)
Student demonstrates
excellent understanding of
key concepts and uses
vocabulary in an entirely
appropriate manner.
Student demonstrates
good understanding of the
task and mentions some
relevant concepts and
demonstrates use of the
relevant vocabulary.
Student understands the
task and provides minimum
theory and/or some use of
vocabulary.
Student understands the task
and attempts to answer the
question but does not
mention key concepts or uses
minimum amount of relevant
vocabulary.
Application (30%) Student applies fully
relevant knowledge from
the topics delivered in
class.
Student applies mostly
relevant knowledge from
the topics delivered in
class.
Student applies some
relevant knowledge from
the topics delivered in
class. Misunderstanding
may be evident.
Student applies little relevant
knowledge from the topics
delivered in class.
Misunderstands are evident.
Critical Thinking
(30%)
Student critically assesses
in excellent ways, drawing
outstanding conclusions
from relevant authors.
Student critically assesses
in good ways, drawing
conclusions from relevant
authors and references.
Student provides some
insights but stays on the
surface of the topic.
References may not be
relevant.
Student makes little or none
critical thinking insights, does
not quote appropriate
authors, and does not
provide valid sources.
Communication
(20%)
Student communicates
their ideas extremely
clearly and concisely,
respecting word count,
grammar and spellcheck
Student communicates
their ideas clearly and
concisely, respecting word
count, grammar and
spellcheck
Student communicates
their ideas with some
clarity and concision. It
may be slightly over or
under the wordcount limit.
Some misspelling errors
may be evident.
Student communicates their
ideas in a somewhat unclear
and unconcise way. Does not
reach or does exceed
wordcount excessively and
misspelling errors are
evident.