me he tho QUESTION THREE HJK PIC is considering an investment in one of two corporate bonds ent in one of two corporate bonds that are being proposed for issue by two different listed companies. Both bonds have a par va ring an investor D. Module ay coupon interest on an annual basis. The market price of the first bond IS K107.97. Its coupon rate is 6% and it is due to be redeemed at par in five years time. The second bond is about to be issued with a coupon rate of 4% and w be redeemable at par in five years' time. Both bonds are expected to have the same gross redemption yields (yields to maturity). When choosing bonds for investment, HJK Plc considers duration to be an important factor and therefore need such information in respect of each of the two bonds. Required: It meal of a) Explain and discuss the relationship between coupon rate, yield to maturity and the price of redeemable corporate bonds. [6 Marks] b) Calculate the Macaulay duration of both bonds that HJK Plc is considering for investment [7 Marks] c) Discuss the usefulness of Macaulay duration as a measure of interest rate risk in the bond markets. [7 Marks] [TOTAL: 20 MARKS] me he tho QUESTION THREE HJK PIC is considering an investment in one of two corporate bonds ent in one of two corporate bonds that are being proposed for issue by two different listed companies. Both bonds have a par va ring an investor D. Module IS K107.97. Its coupon rate is 6% and it is due to be redeemed at par in five years time. The second bond is about to be issued with a coupon rate of 4% and w be redeemable at par in five years' time. Both bonds are expected to have the same gross redemption yields (yields to maturity). When choosing bonds for investment, HJK Plc considers duration to be an important factor and therefore need such information in respect of each of the two bonds. Required: It meal of a) Explain and discuss the relationship between coupon rate, yield to maturity and the price of redeemable corporate bonds. [6 Marks] b) Calculate the Macaulay duration of both bonds that HJK Plc is considering for investment [7 Marks] c) Discuss the usefulness of Macaulay duration as a measure of interest rate risk in the bond markets. [7 Marks] [TOTAL: 20 MARKS]