Q1) Your mother had fixed deposit account for 10 years and matured recently She has received good amount of cash and thinking of investing into a suitable bond She consulted an agent and was given the following bonds to choose ABC Bond that pays RM100 in annual interest, with a RM1000 par value It matures in 8 years The required rate of return is 12 percent XYZ Bond that pays 14 percent annual interest, with a RM1000 par value It matures in 15 years The required rate of return is 12 percent PQR Bond that pays RM0 annual interest, with a RM1000 par value However the initial price of the bond is RM600 It matures in 10 years The required rate of return is 12 percent Your mother is very confused, as she does not have any knowledge about bond valuation She sought your advice on this knowing that you are pursuing MBA now You are required to use appropriate calculations and recommend the most suitable bond to your mother please answer urgently

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Posted on Oct 06, 2024

Q1) Your mother had fixed deposit account for 10 years and matured recently. She has received good amount of cash and thinking of investing into

Q1) Your mother had fixed deposit account for 10 years and matured recently. She has received good amount of cash and thinking of investing into a suitable bond.

She consulted an agent and was given the following bonds to choose:

ABC Bond that pays RM100 in annual interest, with a RM1000 par value. It matures in 8 years. The required rate of return is 12 percent.

XYZ Bond that pays 14 percent annual interest, with a RM1000 par value. It matures in 15 years. The required rate of return is 12 percent.

PQR Bond that pays RM0 annual interest, with a RM1000 par value. However the initial price of the bond is RM600. It matures in 10 years. The required rate of return is 12 percent.

Your mother is very confused, as she does not have any knowledge about bond valuation. She sought your advice on this knowing that you are pursuing MBA now. You are required to use appropriate calculations and recommend the most suitable bond to your mother.

please answer urgently