Company Amando Corporation is looking to inbest in one of the following two bonds: Bond 1 Face
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Question:
Company Amando Corporation is looking to inbest in one of the following two bonds:
Bond 1
Face value
100,000.00
Maturity 10 years
Coupon rate
4%
Credit rating
AA
Offer Price
97.100.00
Bond 2
Face value 100.000.00
Maturity 5 years
Coupon 6%
Credit rating
Offer Price
BBB
98.500.00
The yield curve of BAM is as follows:
Maturity
1 year
3 years
5 years
7 years
10 years
Market Interest rate
3,5%
4,25%
5%
5,5%
6%
1) Which bond will you choose?
2)Calculate the price of bond 1 after 3 years.
3) Calculate the price of bond 2 after 2 years.
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