Question: SECTION B R ANSWER ANY TWO (2) QUESTIONS QUESTION 2 [30 MARKS] (a) A company has a $1000 face value bond and a maturity of

SECTION B R ANSWER ANY TWO (2) QUESTIONS QUESTION 2 [30

SECTION B R ANSWER ANY TWO (2) QUESTIONS QUESTION 2 [30 MARKS] (a) A company has a $1000 face value bond and a maturity of four years. The bond carries an annual coupon of 5%. The current market price of the bond is $841.51. Required: (1) What is the yield to maturity (YTM) of the bond? [4 marks] (ii) Suppose subsequent analysis shows that the yield to maturity (YTM) should be 9%, what is the NPV of the bond? [4 marks] (iii) Assuming that the Yield to Maturity (YTM) is 9%, comment about the pricing of the bond? [2 marks]

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