question archive a) Astra Group has an issue of RM1,000 par value bonds with a 14 percent annual coupon interest rate
a) Astra Group has an issue of RM1,000 par value bonds with a 14 percent annual coupon interest rate
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a) Astra Group has an issue of RM1,000 par value bonds with a 14 percent annual coupon interest rate. The issue has ten years remaining to the maturity date. Bonds of similar risks are currently selling to yield a 12 percent rate of return. What is the current value of each Astra bond?
b) Information relating to bond L, M and N are as follows:-
|
Bond |
Par Value($) |
Annual Coupon Interest Rate (%) |
Years to Maturity |
Required Return (%) |
|
L |
1000 |
9 |
5 |
6 |
|
M |
100 |
10 |
8 |
10 |
|
N |
500 |
18 |
17 |
15 |
(i) Calculate the current value of L.
(ii) What will happen to value/price as the bond approaches maturity?
(iii) Explain if bond sells at discount, premium and par. Give example.
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