Qantas is issuing 10 year bonds that pay a 6% p.a. coupon annually with a face value of $100,000. The three potential buyers and their yield-to-maturity are: Sarah who requires a YTM of 0.25% each fortnight, Sean with a YTM of 2% each quarter and Anh that needs to ean 3% each half year.

For each bond, Sarah is willing to pay= ?

, Sean is willing to pay= ?

and Anh is willing to pay= ?

. (hint: EAR is not required, all rates adjustments are nominal adjustments only)

The order of buyers that Qantas will sell to are

1. 1st Sean, 2nd Anh, 3rd Sarah
2. 1st Sarah, 2nd Anh, 3rd Sean
3. 1st Anh, 2nd Sarah, 3rd Sean
4. 1st Sean, 2nd Sarah, 3rd Anh
5. 1st Anh, 2nd Sean, 3rd Sarah

CHOOSE ANY ONE

.If Qantas wishes to use the capital raised to maturity match, the bond capital will used to fund

1. current liabilities; this reduces liquidity risk.
2. long term assets; this reduces liquidity risk.
3. medium term assets; this reduces liquidity risk.
4. current assets; this increases liquidity risk.
5. short term assets; this increases liquidity risk.

CHOOSE ANY ONE

.