Question: QUESTION 2 (10 MARKS) a. A RM1,000 face value bond with maturity period of 15 years pays 8% coupon rate. This bond was issued 5

QUESTION 2 (10 MARKS) a. A RM1,000 face value bond with

QUESTION 2 (10 MARKS) a. A RM1,000 face value bond with maturity period of 15 years pays 8% coupon rate. This bond was issued 5 years ago. Current interest rate in the market is 10%. i. What is the present value of the bond if the coupon rate is paid semiannually? (5 marks) ii. You expect the above bond to be called in FIVE (5) year time from now, calculate the present value of the bond. Assume coupon rate is paid annually. If the market price is RM1,090, would you buy the bond? Why? (5 marks) END OF QUESTION PAPER

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