Question: Question 5 (This question has two parts (a) and (b)) GrowthSec Ltd has raised $10M in debt funding by issuing 100 5 year bonds with

Question 5 (This question has two parts (a) and (b))

  1. GrowthSec Ltd has raised $10M in debt funding by issuing 100 5 year bonds with a face value of $100,000 each. The bonds pay semi-annual coupons at 6% p.a. If the yield to maturity is 7% p.a., what will be the price of each bond?
  2. If after one year the bond is trading at a premium, what must have happened to market interest rates? Why has this impacted the bond price?

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