Question: Suppose that we have a five-year bond which pays a coupon of &5. The bond has a par value of RM100 and the yield to

  1. Suppose that we have a five-year bond which pays a coupon of &5. The bond has a par value of RM100 and the yield to maturity (rate of return to bondholders) of 6%. Compute the bond price if the coupon payment is paid: (i) annually and (ii) semiannually.
  2. A 7-year zero coupon bond is currently priced at RM60. The par value of the bond is RM100. Compute the yield to maturity of this bond.

(5 marks)

  1. Find the duration of bond with a maturity 5 years from now. The coupon rate of the bond is 5%, and the bond pays coupons semiannually. The bond is selling at a yield to maturity of 6%. What is the modified duration of the bond? (5 marks)

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