Question
Bella, a new executive at Nyonya Capital, is required to perform simple analysis of bonds in the bond market. She wants to calculate the theoretical
Bella, a new executive at Nyonya Capital, is required to perform simple analysis of bonds in the bond market. She wants to calculate the theoretical values of the following four (4) bonds. Using the information provided below, calculate the intrinsic value of each bond and provide a short analysis from your findings. Par value for each bond is RM1,000. Hint: the analysis should include the relationship between coupon rate, yield to maturity and bond price (discounted/at par/premium).
| Coupon rate (%) | Coupon frequency | Yield to maturity (i) | Time/Year to maturity (n) | Intrinsic Value/Price (P0) |
AA | 10 | Annually | 10 | 8 |
|
BB | 10 | Semiannually | 10 | 8 |
|
CC | 10 | Annually | 12 | 10 |
|
DD | 12 | Annually | 9 | 15 |
|
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