(b) Consider two 20 years bond with annual coupon payments. Bond A has 8 percent coupon rate and bond B has 4 percent coupon rate. If the market yield to maturity is 5 percent: i. Calculate the price of each bond assume a RM100,000 face value. ii. Determine for both bonds, are they trading at premium, par or discount. (c) Consider a 30 years, zero-coupon bond with a yield to maturity of 5 percent. If the bond is issued with a face value of RM500,000. i. Calculate the price of the bond. ii. Suppose interest rate suddenly rise so that investors now demand an 8 percent yield to maturity before they invest in this bond. Calculate the price of the bond now with the new yield. iii. Conclude from above, the relationship of the bond yields to price of bond.

(b) Consider two 20 years bond with annual coupon payments. Bond A has 8 percent coupon rate and bond B has 4 percent coupon rate. If the market yield to maturity is 5 percent: i. Calculate the price of each bond assume a RM100,000 face value. ii. Determine for both bonds, are they trading at premium, par or discount. (c) Consider a 30 years, zero-coupon bond with a yield to maturity of 5 percent. If the bond is issued with a face value of RM500,000. i. Calculate the price of the bond. ii. Suppose interest rate suddenly rise so that investors now demand an 8 percent yield to maturity before they invest in this bond. Calculate the price of the bond now with the new yield. iii. Conclude from above, the relationship of the bond yields to price of bond.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 4P

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