QUESTION 1

BOUROUGE Telecoms PLC issues a 4-year maturity 8% Coupon Bonds to finance fibre-optic projects for the Dubai 2020 Expo. The yield to maturity in the market is 10% and the par value of the Telecoms bond is AED 6,000.

Using the information provided above, you are required to answer the following questions:

a) Calculate the price of the ETISALAT Telecoms Bond [10 Marks]

Year Cash Flows Discount Factor @10%=1/(1+YTM)n PV of Cash Flows

1

2

3

4

4

Bond Price

Is this a premium, par value or discount bond? Explain clearly the reason for your answer.