A Multi-national Corporation sold an issue of bonds in the Pakistani bonds market. The main features of these bonds were as follow:a) Maturity period = 10 Yearsb) Face value = Rs.1,000c) Coupon rate = 10% per annumd) Interest is paid semi-annuallyRequired:1) Two years after the bonds were issued, thegoing rate of interest on bonds such as these fell to 6% per annum. At what price would the bonds sell in the market?

A Multi-national Corporation sold an issue of bonds in the Pakistani bonds market. The main features of these bonds were as follow:a) Maturity period = 10 Yearsb) Face value = Rs.1,000c) Coupon rate = 10% per annumd) Interest is paid semi-annuallyRequired:1) Two years after the bonds were issued, thegoing rate of interest on bonds such as these fell to 6% per annum. At what price would the bonds sell in the market?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 9P

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A Multi-national Corporation sold an issue of bonds in the Pakistani bondsmarket. The main features of these bonds were as follow:a) Maturity period = 10 Yearsb) Face value = Rs.1,000c) Coupon rate = 10% per annumd) Interest is paid semi-annuallyRequired:1) Two years after the bonds were issued, thegoing rate of interest on bondssuch as these fell to6% per annum. At what price would the bonds sell inthe market? 2) Suppose that, two yearsafter the initial offering, the going interest ratehad risen to 12%. At what price would the bonds sell?3) Comment on your resultsNote: In both cases you need to calculate market price/bond.
A Multi-national Corporation sold an issue of bonds in the Pakistani bondsmarket. The main features of these bonds were as follow:a) Maturity period = 10 Yearsb) Face value = Rs.1,000c) Coupon rate = 10% per annumd) Interest is paid semi-annuallyRequired:1) Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 6% per annum. At what price would the bonds sell in the market? 2) Suppose that, two years after the initial offering, the going interest ratehad risen to 12%. At what price would the bonds sell?3) Comment on your results in Part-1 and Part-2.
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