The Trustees of Villa Pension Fund have appointed you as Investment Adviser to the Fund. One of…

The Trustees of Villa Pension Fund have appointed you as Investment Adviser to the Fund. One of…

The Trustees of Villa Pension Fund have appointed you as Investment Adviser to the Fund.

One of your first tasks is to advise the Trustees on the selection of some local listed corporate bonds.

The pension fund has surplus cash of Rs 50m to invest in local corporate bonds and it will not need to sell investments over the next 5 years to pay pensioners.

The Trustees have the following options to consider:

Security

Market Price (Rs)

Nominal

Value (Rs)

Interest

(Annual)

Maturity

Omnicane Note

10,487.70

10,000

6.30% (Fixed)

2021

Evaco Note

1060.75

1000

Repo Rate+3%

2021

UBP Bond

100.04

100

Repo Rate+1.2%

2018

The above securities are listed on the Official Market of the Stock Exchange of Mauritius.

Required:

Prepare a Report for the Trustees of Villa Pension Fund and recommend which bond you would select.

Your Report should also cover the following:

· A brief summary on the Issuer of each Bond/Note,

· Main risks if one invests in each Bond/Note,

· Advantages of investing in each Bond/Note,

· How the concept of ‘Duration’ could affect the decision of the Trustees.

The Trustees of Villa Pension Fund have appointed you as Investment Adviser to the Fund. One of…

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