Question
A company has two different bonds currently outstanding. Both bonds have a face value of R100. Bond A matures in 10 years. The bond makes
A company has two different bonds currently outstanding. Both bonds have a face value of R100. Bond A matures in 10 years. The bond makes no coupon payments for the first four years and then pays R8.50 semi-annually for the subsequent four years, and finally pays R10.50 semi-annually for the last two years. Bond B also matures in 10 years; it makes coupon payments of R4.50 semi-annually over its life. The yield to maturity on both bonds is 12% per annum, compounded semi-annually.
What is the current price of each bond and if interest rates decline which bond to invest to, please assit by showing the calculations as i do not have financial calculator and do not want to use excel. i want to understand the steps of calculation.
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