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QUESTION 3 (30 MARKS) a. Najihah is considering investing in corporate bonds. The following data could be relevant for her to evaluate the bonds' prospect

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QUESTION 3 (30 MARKS) a. Najihah is considering investing in corporate bonds. The following data could be relevant for her to evaluate the bonds' prospect before investing. Laksana Bond Kesturi Bond Coupon rate 10% per annum 10% per annum Maturity date 10 years 7 years Market interest rate 14% per annum 6% per annum Annually compounded Semiannually compounded Par value RM1,000 RM1,000 Market price RM924 RM1,180 Required: i. Calculate the maximum price that Najihah should pay for each bond? (6 marks) ii. Comparing the answer in (i) with the market price of each bond as stated above, which bond should Najihah buy? Justify your answer. (2 marks) iii. From the answers above, draw a diagram showing the relationship of the bonds prices and the interest rate. (7 marks)

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