## The interest rates are currently 2% at most banks in Australia (ANZ, 2015). Deposit money into bank and collect interest is the safest way to invest the excess money. However, the return is not high though the risk is small. Property investment is considered as high risk investment (Pickering, 2015). Recent years have witnessed its booming in return and average return is 9.8% over Australia (Yardney, 2014). Share market is also known as a risky area. As stated by Reeves (2014), there are too many factors that could influence the market’s performance such as global wage stagnation, optimism turning over, Euro-zone deflation and so on. Compared with these three market, the portfolio in this question provided a good return with tolerable risks. The return is average 8% while the risk is 1.02% which is considered as low compared to high risk markets. The coefficient of variation is also very low which shows that the portfolio is considered as a low risk investment while considered its returns. Therefore, this portfolio is worth investment. The yield to maturity rate should be less than 12% because the bond has a value more than its par value. We know the bond present value is derived by discounting the future cash flow that generated by the bond to its present value. So if the yield to maturity rate has a lower value, the bond will have a higher present value. If we take 12% as the yield to maturity we will find the bond value should equal to its par value Based on the formulae, we can calculate the bond value if we know the interest, par value and the yield to maturity. As the question indicated, the required return is 14% and it is paid semi-annually, so the yield to maturity for half year is 7%. The interest rate for the bond is 6% and is also paid semi-annually. So the half year interest should be 3% of par value. The period of the bond should be 8 as it is paid semi-annually. Therefore, the bond value should be 3 X 5.9713 + 100 X 0.5820 = 76.1 The bond value should be $76.1 This is a discount bond as its value is lower than its par value. The reason that it becomes a discount bond is it provides a lower interest than the market can give. In a similar risk bonds market, the interest rate is 14% while this bond can only provide 6%. So, the bond is trading at a discount price. The free cash flow growth rate is zero. Then, we take assumption that the free cash flow will be constant in the future since 2016.

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