Calculate the selling price of each of the bonds

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Companies often buy bonds to meet a future liability or cash outlay. Such an investment is called dedicated portfolio because the proceeds of the portfolio are deducted to the future liability . In such case, Ice Cubes ,Inc. broker has shown two bonds . Each has a maturity of 5 years , a par value of BD2,000 and a yield to maturity of 14 % . Bond A has a coupon interest rate of 8 % paid annually . Bond B has a coupon rate of 12 % paid annually

a. Identify the cash flow and illustrate the time line for each bonds

b. Calculate the selling price of each of the bonds

c. Which of these two bonds could be a better choice?

d. Ice Cubes, Inc has BD30,000 to invest. Judging on the basis of the price of the bonds. How many of either one could the company purchase if it went were choose it over the other?

Reference no: EM133227619

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