BBF305/03: Explain five advantages of preferred stock and Elaborate any three features of common stock: Investment and Portfolio Management Assignment, WOU, Malaysia

QUESTION 2 

a) Explain five advantages of preferred stock.

b) Elaborate any three (3) features of common stock.

c) Describe the salient characteristics of the bond.

d) Home Company paid an annual dividend of RM0.90 per share this year. The company expects that the dividend will grow at an annual rate of 15 percent for the next five years and then drop to a gradual growth rate of 7 percent indefinitely. The required rate of return is 10 percent and the share is currently trading at RM48.

i) Calculate the intrinsic value of the share today.

ii) Justify whether you would buy the share.

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