How much is the estimated price of the illiquid bond k

Reference no: EM132831002

Assume that an analyst needs to value a 4-year, 5% annual coupon payment bond, Bond-K, which is not actively traded. The analyst could find some other bonds, however, with a comparable credit quality:

Bond-L: 3-year, 5.5% annual coupon payment bond at a price of 108; and

Bond-M: 5-year, 4.5% annual coupon payment bond at a price of 105.

All bonds come with a face value of P100.

Requirement:

Problem 1. Find the YTM (Yield to Maturity) of bonds L, M and K.

Problem 2. How much is the estimated price of the illiquid bond K per P100 of each par value.

Reference no: EM132831002

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