a) Bond has a face value of ₡3000 and pays coupon of 12% per annum for 4 years, if the market interest rate is 16%. How much will you pay for this bond. If the coupon was to be paid semi- annually will your answer be different.
a) Bond has a face value of ₡3000 and pays coupon of 12% per annum for 4 years, if the
market interest rate is 16%. How much will you pay for this bond. If the coupon was to be
paid semi- annually will your answer be different.
b) A U.S. investor obtains Ghana cedis when the cedi is worth $.33 and invests in a one-year
investor converts the proceeds from the investment back to dollars at the prevailing spot
rate of $.26. What is the effective yield earned by this foreign investor?
Honor Note:
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Introduction:
The present value of a bond is calculated by discounting the bond's future cash payments by the current market interest rate. Bond valuation is a technique for determining the theoretical fair value of a particular bond. The bond valuation includes calculating the present value of the bond's future interest payments, also known as its cash flow, and the bond's value upon maturity, also known as its face value or par value.
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