B. Mr. Yosef wishes to buy a bond which bearing no interest for his childs education savings. Mr. Yosef is expecting a yield of 5% rate of return per year from the savings. Bank Negara Malaysia, on behalf of the government is planning to issue GII, a zero-coupon bond at a discounted price to the face value of the bond. The par value of the bond is RM1,000 per unit. On maturity date in the year 2025, the zero-coupon bond will be redeemed at par value.

Required:

i. Determine the maximum price of the GII bond that will mature in 2025 that Mr. Yosef is willing to pay. Assume today is December 2022. (3 marks)

ii. If Mr. Yosef invest in GII zero-coupon bonds, estimate the amount of capital gain earned when the bonds matured. (2 marks)

iii. Distinguish between Deep Discount Bond and Zero Coupon Bond. (4 marks)