You want to buy a portfolio of financial securities consisting of three,$1,000 face value Government of Canada bonds and 500 preferred shares of Laurentide Resort Inc.
Laurentide Resort has a preferred share series trading on the Toronto Stock Exchange.It pays a dividend of $0.56 semi-annually.The required rate of return on the stock is 12 percent compounded semi-annually.The bonds have 4 years to maturity and an 8 percent semi-annual coupon.Currently,the yield to maturity on these bonds is 10 percent compounded semi-annually.
A) What is the current intrinsic value of Laurentide Resort's preferred stock?
B) What is the current price of the 4-year coupon bonds?
C) What is the current value of your portfolio (i.e., bonds + preferred stock)?
D) It is now 2 years later. Market interest rates have dropped and the yield to maturity on these bonds is now 8 percent. What is the value of the bonds at this time?
E) It is still 2 years later and the yield to maturity has dropped to 8%. Assume that the price of Laurentide Resort Inc. is now $8.50. What is the expected annual rate of return on your portfolio over the two years from your investment?

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The Answer of You want to buy a portfolio of financial securities consisting of three,$1,000 face value Government of Canada bonds and 500 preferred shares of Laurentide Resort Inc.
Laurentide Resort has a preferred share series trading on the Toronto Stock Exchange.It pays a dividend of $0.56 semi-annually.The required rate of return on the stock is 12 percent compounded semi-annually.The bonds have 4 years to maturity and an 8 percent semi-annual coupon.Currently,the yield to maturity on these bonds is 10 percent compounded semi-annually.
A) What is the current intrinsic value of Laurentide Resort's preferred stock?
B) What is the current price of the 4-year coupon bonds?
C) What is the current value of your portfolio (i.e., bonds + preferred stock)?
D) It is now 2 years later. Market interest rates have dropped and the yield to maturity on these bonds is now 8 percent. What is the value of the bonds at this time?
E) It is still 2 years later and the yield to maturity has dropped to 8%. Assume that the price of Laurentide Resort Inc. is now $8.50. What is the expected annual rate of return on your portfolio over the two years from your investment?

You Want to Buy a Portfolio of Financial Securities Consisting