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Question 3 a. Explain with example, the relationship between interest rate, current yield and Yield to Maturity in relation to Bond pricing. (10 marks) b.

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Question 3 a. Explain with example, the relationship between interest rate, current yield and Yield to Maturity in relation to Bond pricing. (10 marks) b. Lima berhad has 2 issues of bond outstanding. Both have a coupon interest rate of 8 percent. The yield required on each bond is 12 percent. Bond A has a maturity of 10 years and Bond B has a maturity of 20 years. Coupon is paid annually and pays RM1000 at maturity. Calculate the intrinsic value of each bond? (10 marks) C. What will be the price of a Zero-Coupon bond that matures in 10 years and has a maturity value of RM1000 if the required rate of yield is 8.6 percent

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