Question: [Total 20 marks] Question Consider two mutually exclusive bonds with the following details. Bond A: A 10% K1,000 bond redeemable at par in 5 years'

[Total 20 marks] Question Consider two mutually exclusive bonds with the

[Total 20 marks] Question Consider two mutually exclusive bonds with the following details. Bond A: A 10% K1,000 bond redeemable at par in 5 years' time. Bond B: A 9% K1000 bond redeemable at a 2% premium in 7 years' time. The current market interest rate is 8%. The market interest changes are expected to be negligible over the next 8 years. Required: a) Calculate the bond duration for EACH of the two bonds (Bond A and Bond B) and interpret [16 marks) b) Recommend the best option for an investor (give valid reasons). [4marks] [Total 20 marks] the results. Question 5

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