QUESTION $1$

$($a$)$ Explain FOUR $(4)$ reasons that influence the changes which make debt security

yields vary.

$($b$)$ If a government bond is expected to mature in two years and has a current price

of RM$950,$ calculate the bond's interest rate$/$yield if it has a par value of RM$1,000$

and a promised coupon payment rate of $10\%.$

$($c$)$ From part $($b$)$ above, illustrate how the bond price$/$value if the interest rate$/$yield

moves up $($increase$).$