Question 1

DataMicron Berhad has a bond that curently sells at 90 percent of its par value with 10 percent coupon rate and 10 years to maturity. Calculate:

i)Current Yield

ii)Yield to Maturity

Question 2

An 8-percent, 20-year bond issued 5 years ago is currently selling for RM1,000.

i)Determine the bond's yield to maturity

ii)If your required rate of return is 10 percent, will you invest in this bond.

Question 3

Nisrina Berhad is interested to invest in bonds. Currently its financial manager is evaluating Bond A and Bond B. Bond A pays 9% coupon semi-annually and matures in 12 years. Bond B pays 7% coupon annually having a maturity period of 13 years.

i)Determine the value of each bond if the current market yield for both bonds is 8%

ii)Assume Bond A iss currently selling at RM990 while bond B is selling at RM950. Which bond would Nisrina Berhad buy? Why?

Question 4

a)A 9.5%, 25 year bond issued 6 years ago is currently priced in the market RM980. Determine the bond's yield to maturity (YTM)

b)A 9.5%, 25 year bond issued 6 years ago is currently priced in the market RM1080. Determine the bond's yield to maturity (YTM)

c)Based on (a) and (b) explain the relationship between YTM and bond prices.

Question 5

XYZ Corporation has outstanding a RM1,000 par-value bond with a 12% coupon interest rate. The bond has 15 years remaining to its maturity date. Using the information given, interest is paid annually, find the value of the bond for each required rate of return.

i)9%

ii) 12%

iii)14%

Which bond sells at par, premium and discount. Draw a diagram to show the relationship betwenn bond prices and required rate of return.

Question 6

A 10-year bond pays interest of RM35 semi-annually, has a par value of RM1,000 and is selling at RM737. You are required to determine:

i)Coupon rate

ii)Current yield

Notes:

Yield refers to the earnings generated on investment over a particluar period of time. It is expessed in term of percentage.

Current yield is the yield of a bond at the present moment.

The Yield to Maturity is the yield when a bond becomes mature.