1. Two types of bonds are offered to you for bond investment considerations: P10,000, 5-year, 10%...

     

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1. Two types of bonds are offered to you for bond investment considerations: P10,000, 5-year, 10% p.a. Debenture bond issued by Yoo Hoo corp. The interest payable twice a year. The bond has four years remaining term and is offered to you at 98-1/2. . P5,000, 10-year, 10% p.a. Mortgage bond issued by Khoo Coo, Inc. Interest is paid annually. The bond has still 7 years remaining life before its maturity. It is offered to you by a fried at 101-3/4. . It has been your policy that your desired rate of return for unsecured investment should be 12% pa, and for secured investment will earn a minimum of 8% p.a. Based on the above information, you would like to know the following: a. The value of the bond for the two types of bond offered. b. The exact yield to maturity (YTM) of the two bonds offered. c. Which bond you wish to invest? Why? 1. Two types of bonds are offered to you for bond investment considerations: P10,000, 5-year, 10% p.a. Debenture bond issued by Yoo Hoo corp. The interest payable twice a year. The bond has four years remaining term and is offered to you at 98-1/2. . P5,000, 10-year, 10% p.a. Mortgage bond issued by Khoo Coo, Inc. Interest is paid annually. The bond has still 7 years remaining life before its maturity. It is offered to you by a fried at 101-3/4. . It has been your policy that your desired rate of return for unsecured investment should be 12% pa, and for secured investment will earn a minimum of 8% p.a. Based on the above information, you would like to know the following: a. The value of the bond for the two types of bond offered. b. The exact yield to maturity (YTM) of the two bonds offered. c. Which bond you wish to invest? Why?

Answer rating: 100% (QA)

SOLUTION a To calculate the value of the bonds we need to use the present value formula PV C x 1 1 rn r FV 1 rn Where PV Present value of the bond C A... View the full answer