Question 3 (10 Marks)

3.1. You are asked to put a price on a bond with a coupon rate of 8%. It will repay its face value of N$100 at the end of 15 years. Other similar bonds have a yield to maturity (YTM) of 12%. (5)

3.2. A bond is currently trading at N$78.40, and it will pay its face value of N$100 at the end of 15 years. Similar bonds have a yield to maturity of 11.17%. What is the bonds coupon rate? (5)