Ms Xaluva purchased a R 1 500 par value bond, with 10 years to the maturity date. The bond pays

a coupon rate of 8%

 

Q.1If the required rate of return is 7% calculate the value of the bond at purchase date.  

 

Q.2 If the required rate of return increases by 2% due to the increasing inflation rate during the first year of the bond calculate the amount that Ms Xaluva could sell the bond for at the end of the first year.