A 5-year 10% coupon bond is offered for sale on 1/1/2023. Coupon is payable at the end of each year. The redemption value of the bond is at par of Rs100.

a. You are willing to subscribe to the bond but require a 8% p.a. yield. What is the price at which you will be willing to buy the bond?

b. What is the price of this bond on 1/1/2024 assuming the yield to maturity is unchanged at 8%?

c. On 1/1/2024, the Reserve Bank of India increases interest rates to fight inflation. Investors now require a 9% p.a. yield to maturity. What will be the price of the bond after the RBI announcement?

d. Due to market volatility and bad news about the company, price of the bond has declined to Rs97.55 on 1/1/2025. What is the yield to maturity that investors are now requiring for investing in the bond?

e. Your friend runs a distressed debt fund and buys bonds in troubled companies if he can get a 24% p.a. return. At what price would he be willing to buy the bond on 1/1/2026?