GVM Ltd has recently issued a new type of bond which pays different coupon amounts over the life of the debt instrument. The bonds will have a face value of $100,000, and from today have 9 years and 4 meaning remaining until maturity. When GVM Ltd issued the bond (which had a maturity of ten years at issue), they stipulated

GVM Ltd has recently issued a new type of bond which pays different coupon amounts over the life of the debt instrument. The bonds will have a face value of $100,000, and from today have 9 years and 4 meaning remaining until maturity. When GVM Ltd issued the bond (which had a maturity of ten years at issue), they stipulated that they will pay coupons at a rate of 9% for the first five years of the bond, and 11% for the last five years. Coupons would be paid semi-annually.

Answer the following questions:
Given the required fate of return on the bend is 10% p.a. over the life of the bond, how much IS the bond currently trading for today?

Expert Answer

The required return on the bond is 10% p.a. over the life of the bond. The bond currently View the full answer