Hargrave Limited is selling a new bond to raise capital for their factory in Indonesia.The bond has a face value of $100,000 and pays a coupon rate of 8.25% p.a. Couponpayments will be made on June 30 and December 31 of each year. The bond’s issuedate is January 1, 2019 and matures on December 31, 2024. By the time the bond isoffered to investors on January 1, 2019, the market interest rate has increased to11.5% p.a.
a. How much would investors be willing to pay for this bond?
b. How much would investors pay for the above-mentioned bond, if the marketinterest rate on January 1, 2019 is 6% p.a.?
c. Compare your answers from part a. and part b. above with the face value of$100,000 and explain why the bond value is more (or less) than the facevalue. 

Answer rating: 100% (QA)

Required solution of all the parts are given below Coupon payment is made every six months and coupon amount 825 of 10000012 4125 Ans a Investors will ... View the full answer