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a) Explain the relationship between the yield to maturity of a par bond and its coupon rate. XYZ Ltd wishes to raise $24 million to
a) Explain the relationship between the yield to maturity of a par bond and its coupon rate.
XYZ Ltd wishes to raise $24 million to fund its investment projects.
b) The company is planning to issue 15-year semi-annual coupon bonds with and a coupon rate of 7% and a face value of $1,000. The nominal annual yield to maturity of investors is expected to be 6.5% per annum. Calculate the required number of semi-annual coupon bonds to raise $24 million.
c) Alternatively, XYZ Ltd is looking into issuing 20-year zero-coupon bonds with a face value of $1,000. The desired effective annual yield to maturity of investors is expected to be 8%. Calculate the required number of zero-coupon bonds to raise $24 million.
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