A company has just issued a debenture stock which bears interest at 10% per annum payable annually in arrears. Half of the nominal amount of the stock is to be drawn for redemption at 105 per cent after five years and the remainder is to be redeemed at the same price after ten years. A financial institution is considering the purchase of the entire issue. The financial institution assumes that the chance that the payments due at time t years (whether of capital or interest) will actually be made is (100 - 5t)% and values these expected payments at 8% per annum. The possibility of partial payment is ignored. (i) Calculate the price per R100 nominal that the financial institution should offer for the stock. (ii) Given that the price in (i) above is accepted, calculate the annual yield per cent (to the nearest integer) on the debenture stock on the assumption that all payments of interest and capital will be made. Ignore taxation. (13] A company has just issued a debenture stock which bears interest at 10% per annum payable annually in arrears. Half of the nominal amount of the stock is to be drawn for redemption at 105 per cent after five years and the remainder is to be redeemed at the same price after ten years. A financial institution is considering the purchase of the entire issue. The financial institution assumes that the chance that the payments due at time t years (whether of capital or interest) will actually be made is (100 - 5t)% and values these expected payments at 8% per annum. The possibility of partial payment is ignored. (i) Calculate the price per R100 nominal that the financial institution should offer for the stock. (ii) Given that the price in (i) above is accepted, calculate the annual yield per cent (to the nearest integer) on the debenture stock on the assumption that all payments of interest and capital will be made. Ignore taxation. (13]