A 10-year bond with face value of TZS. 1,000 and redeemable at par was issued with...
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A 10-year bond with face value of TZS. 1,000 and redeemable at par was issued with a coupon rate of 7% payable annually. The coupon rate was consistent with the market interest rates prevalent then. The bond has got 6 years to maturity and the market scenario of interest rates has changed. The term structure of interest rates prevailing now is as follows: 1-year: 6.00% 4-year: 7.00% 2-year: 6.25% 5-year7.50% 3-year: 6.50% 6-year: 8.50% REQUIRED: Find the yield maturity of the bond. (6 marks) Explain why different sources of capital have different levels of risk and return. A 10-year bond with face value of TZS. 1,000 and redeemable at par was issued with a coupon rate of 7% payable annually. The coupon rate was consistent with the market interest rates prevalent then. The bond has got 6 years to maturity and the market scenario of interest rates has changed. The term structure of interest rates prevailing now is as follows: 1-year: 6.00% 4-year: 7.00% 2-year: 6.25% 5-year7.50% 3-year: 6.50% 6-year: 8.50% REQUIRED: Find the yield maturity of the bond. (6 marks) Explain why different sources of capital have different levels of risk and return.
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Answer rating: 100% (QA)
To find the yield to maturity YTM of the bond we need to calculate the present value of its cash flows including both coupon payments and the redemption value at maturity Given Face value of the bond ... View the full answer
Related Book For
Horngrens Accounting The Financial Chapters
ISBN: 9780136162186
13th Edition
Authors: Tracie Miller Nobles, Brenda Mattison
Posted Date:
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