Question
On January 01, 2020, Dela Plc has 1,000 par value bond outstanding having a coupon rate of 8.5 percent which were set to mature in
On January 01, 2020, Dela Plc has 1,000 par value bond outstanding having a coupon rate of 8.5 percent which were set to mature in 13 years from the said date. Calculate the maximum price an investor will be willing to pay if the investor required an 8% percent yield-to-maturity on this bond based on risk assessment on January 01, 2020. One year onward on January 01, 2021, investors required rate of return increased to 10.5%, what would be its impact on price of Delas bonds? Explain your findings and factors that could have contributed to increased required rate of return.
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