question archive 2) Analyze your answors and fill in the box below
2) Analyze your answors and fill in the box below
Subject:FinancePrice:2.86 Bought7
2) Analyze your answors and fill in the box below. From your answer, draw a graph to show the first and second relationship. Question Coupon rate Value Bond (RM) Required rate of return (%) (%) (a) (b) (c) (Question 3-6 will test on the third relationship): As the maturity date approaches, the market value of a bond approaches its par value. 3. Permata Biru issued 7 year's bonds 4 years ago with a par value of RM1, 000. The coupon rate is 12 per cent and investors required rate of return is 7 per cent on these bonds. Assume that interest is paid annually. What is the intrinsic value of the bond? 4. Kembara Hati issued 7 year's bond 6 years ago with a par value of RM1, 000. The coupon rate is 12 percent and investors required rate of return is 7 percent on these bonds. Assume that interest is paid annually. What is the intrinsic value of the bond?
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3.
Years left to maturity = 7 - 4 = 3
Par value = 1000
Coupon = 1000 x 12% = 120
Required return = 7%
Value of the bond = P x [1 - (1 + r)-n] / r + FV / (1 + r)n = 120 x [1 - (1 + 0.07)-3] / 0.07 + 1000 / (1 + 0.07)3 = 1,131.22
4.
Years left to maturity = 7 - 6 = 1
Par value = 1000
Coupon = 1000 x 12% = 120
Required return = 7%
Value of the bond = P x [1 - (1 + r)-n] / r + FV / (1 + r)n = 120 x [1 - (1 + 0.07)-1] / 0.07 + 1000 / (1 + 0.07)1 = 1,046.73
