Calculate the price of the bond on the 31st of march 2021

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Reference no: EM133265518

Company Z raised $1m through a 10-year bond issue on the 31st of December 2019. The bond pays 5% per annum (p.a.) in coupons, with coupons paid quarterly.

(i) Calculate the price of the bond on the 31st of March 2021, given a market yield of 4.5% p.a. Show all calculations.

(ii) In your answer, identify whether the bond is trading at a discount or a premium, and explain the logic why this is the case.

Reference no: EM133265518

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