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a) Kamalia asks you which bond she should invest in; Bond A with a RM 1,000 face value, market value RM 820, required rate of
a) Kamalia asks you which bond she should invest in; Bond A with a RM 1,000 face value, market value RM 820, required rate of return of 13% and a 10% annual coupon rate matures in 15 years or Bond B, a zero coupon bond with similar risk and is selling for RM 180. The yield to maturity on the zero coupon bond is 14%. Required: i. Calculate the intrinsic value of Bond A and B. (4 Marks) ii. Which bond do you recommend, and why? (2 Marks)
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