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.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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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 
money market security that provides a yield (in cedis) of 24%. At the end of one year, the 
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?

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Information Provided:

  • Face value = 3000
  • Coupon rate = 12%
  • Bond maturity = 4 years
  • Interest rate = 16%

 

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