(d) A 5-year 12% coupon bond with a face value of GHS100 pays interest twice a year, sells for GHS110, and is redeemable at par. The recent interest payment was made in December.

Required:

1. If Makosa decides to buy this bond in January, he will likely pay an invoice price different from the quoted price of 110. Why.
2. The intrinsic price of this bond is GHS 100. Would you recommend that Makosa buys this bond? Explain