Question: Question 3 a) A 10-year coupon bond has a face value of 1,500 and carries an annual coupon of 100 paid at the end

Question 3 a) A 10-year coupon bond has a face value of

Question 3 a) A 10-year coupon bond has a face value of 1,500 and carries an annual coupon of 100 paid at the end of each year. Assume a market interest rate of 6.5% per year. Calculate the current value of the bond. [7 marks] b) Calculate the current value of a "zero coupon" bond that has a face value of 2,000 and a maturity date of 8 years, assuming a market interest rate of 6.5% per year. [5 marks] c) Company "CPN plc" will pay a dividend of 2.5 per share in one year from now on. The company expects that the growth rate will be 5% per year forever. Calculate the value of one share of the company assuming a discount rate of 12% per year. [8 marks] [Total: 20 marks]

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