Supposed a 7-year bond with an 8% coupon rate paid semi-annually and the required rate of...
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Supposed a 7-year bond with an 8% coupon rate paid semi-annually and the required rate of return is 6%. A par value is RM1,000. Based on the information given, 1. Is the bond is currently trading at a discount, at par, or at a premium? Explain. 2. If the required rate of return rises to 10%, with semi-annual compounding, what is the price will the bond trade for? Explain the relationship between interest rate and bond price. Supposed a 7-year bond with an 8% coupon rate paid semi-annually and the required rate of return is 6%. A par value is RM1,000. Based on the information given, 1. Is the bond is currently trading at a discount, at par, or at a premium? Explain. 2. If the required rate of return rises to 10%, with semi-annual compounding, what is the price will the bond trade for? Explain the relationship between interest rate and bond price.
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Answer rating: 100% (QA)
1 Since the coupon rate is higher than the market interest rate then the ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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