As a financial security analyst consider BondAthat has just been issued. Its face value is $1,000with coupon rate of 5% and matures in10 years. BondBwas issued 5 years ago, when interest rates were higher. This bond has $1,000 face valuewith 7% coupon rate.When issued, this bond had a 15-year maturity, so its remaining maturity is 10 years. Assume annualcouponpayments and a 9 percent yield to maturity on the bonds.Assume issuance date was 1^stJanuary for both Bonds.

• Compute the price of the two bonds.(2 marks)
• Find the price of the two bonds using Excel function(2 Marks)
• Compute the duration of bondAand bondB.(2 Marks).
• Which bond has longer duration? Give reasons why.(1 Mark)
• Givingreasons,statewhether the two bonds are selling at a premium, discount or par and why(1 Mark)
• Repeat (a) above assuming that the bondspay semi-annual coupons(2 Marks)

Answer rating: 100% (QA)

Part 1 Computing the price of the two bonds BondA Face value 1000 Coupon rate 5 Maturity 10 years Yi... View the full answer