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What is relationship between interest rates and bond prices

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Question - a) A corporate bond with RM1000 maturity value carries a 7.5% coupon rate. It currently makes interest payments semi-annually.

(i) This 12-year bond currently sells for RM 961.88. What is the rate of return on this bond?

(ii) If the bond sold for RM 1,030.32, what is the rate of return on this bond?

b) Briefly explain the cash flows associated with a bond to the investor.

c) What is the relationship between interest rates and bond prices? When is a bond sold at (i) a premium, (ii) at a discount, and (iii) at par?

Reference no: EM132598739

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