A speculator purchased Barclays Bank Ghana Limited corporate bond for ¢500,000. The bond is expected to yield a coupon payment of ¢50,000 per annum for the next 25 years. At the end of this period, it will be necessary to buy a new bond at cost of ¢700,000 at the same coupon rate so that the speculator can still meet his expenditures. Assuming that the coupon rate is the same as the interest, how should the purchaser provide for this future expenditure and what will be the effect on his percentage yield?
A speculator purchased Barclays Bank Ghana Limited corporate bond for ¢500,000. The bond is expected to yield a coupon payment of ¢50,000 per annum for the next 25 years. At the end of this period, it will be necessary to buy a new bond at cost of ¢700,000 at the same coupon rate so that the speculator can still meet his expenditures. Assuming that the coupon rate is the same as the interest, how should the purchaser provide for this future expenditure and what will be the effect on his percentage yield?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A speculator purchased Barclays Bank Ghana Limited corporate bond for ¢500,000. The bond is expected to yield a coupon payment of ¢50,000 per annum for the next 25 years. At the end of this period, it will be necessary to buy a new bond at cost of ¢700,000 at the same coupon rate so that the speculator can still meet his expenditures. Assuming that the coupon rate is the same as the interest, how should the purchaser provide for this future expenditure and what will be the effect on his percentage yield?
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