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How much should be willing to pay for the bond

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Reference no: EM132504963

Question (a) You have recently decided to expand your investment portfolio to include long term 10- years bonds. The two bonds you're currently reviewing has the following characteristics:

 

Face Value
(RM)

Coupon rate
(%)

Coupon Paice

Yield (%)

Bond A

1 million

12

Semi Annual

11

Bond B

1 million

10

Annual

12

i. How much should you pay for both of the bonds? (12 marks)

ii. Bond A and Bond B are trading at premium, par or discount? (2 marks)

Question (b) You are considering buying a RM100,000 bond with a 10 years maturity. The bond coupon rate is 8 percent, and the interest is paid semi annually. If you want to earn an interest rate of 8.16 percent, how much should you be willing to pay for the bond?

 

Reference no: EM132504963

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