Determine the market price of the bonds at issue

Reference no: EM133326466

Two years ago, Malayawata Steel issued RM 100 million worth of ten-year bonds with a face value of RM1,000.00 and a coupon rate of 5%. Coupon payments are made semi-annually.
Two years ago, the market yield-to-maturity was 3% pa.
Due to the increased insecurity facing the industry, the market yield to maturity is now 7% p.a.

Question 1: Determine the market price of the bonds at issue based on an appropriate model.

Question 2: Based on the yield-to-maturity today, assess whether the price has changed and proceed to determine its market price today.

Question 3: Compare the results in (a) and (b) above and interpret the sensitivity of bond prices to maturity and yield to maturity.

Reference no: EM133326466

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