Compute the value of the bond

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Q1. Shocks limited issued a 4 year 12% Sh 100,000 bond on 1st January 2012. The bond pays interest semi-annually and the par value of the bond is redeemable every year end on equal basis. Required- show the cash flow pattern (amounts of interest and principal paid over the life of the bond and compute the price of the bond if similar bonds yield 14%.

Q2. A 10%, Sh 100,000 1 year bond is valued using multiple rate. A 2 month interest rate is 12%, 6 month interest rate is 14%, 9 month interest rate is 16% and 12 month interest rate is 18%. Compute the value of the bond.

Q3. A 10%, 8 years, Ksh 100,000 bond was issued on 1st January 2017 when the market yield rates was 13%. The investor invested coupons in fixed deposit accounts at 15%. On December 31st 2020, he sold the bond to yield 12%. Within his investment horizon, compute the bond total return in both absolute and percentage value.

Reference no: EM132816806

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