Syarikat Debunga Berhad is planning to open at least five boutique stores in several newlyopened shopping malls in Petaling Jaya. It issued a five-year, zero-coupon bond with a facevalue of RM1,000 at a price of RM650. You have purchased this bond and intend to hold ituntil maturity.From the above information, you are required to answer the following questions.a. Determine the yield to maturity of this bond.(2 Marks)b. Compute the expected return on your investment if the risk for default is zero. (2 Marks)c. Compute the expected return if the probability of default is 100% and you will only recover90% of the face value.d. Based on your computation in part (b) and (c), interpret your findings.(2 Marks)(4 Marks)

a.We must apply the following calculation to ascertain this zero-coupon bond's yield to…

Answered: Syarikat Debunga Berhad is planning to…

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

Section: Chapter Questions

Problem 1PS

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The Chief Financial Officer of a company would like to raise money for new equipment by floating a new bond issue. The CFO would like to receive $1000 (full face value) for each of the bonds she sells. After collecting the below bond market data, and if the bonds carry a rating of A and have a term of 10 years, what coupon rate should be included in the bond contract? Assume an annual coupon payment. Security& Rating Maturity Face Coupon Price Treasury 1 $ 1,000 0.00% $ 965.00 Treasury 3 $ 1,000 1.90% $ 939.06 Treasury 5 $ 1,000 4.30% $ 932.42 Treasury 10 $ 1,000 6.80% $ 1,007.12 Treasury 15 $ 1,000 6.60% $ 908.25 CorpA A 5 $ 1,000 8.10% $ 990.00 CorpB BB 10 $ 1,000 7.90% $ 859.88 CorpC AA 15 $ 1,000 7.00% $ 660.00
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