QUESTION 9

Bonds are a very desireable ivnestment option for you. Therefore, you have always been looking for fresh investment options to invest in bonds. You came across a company that is considering issuing a bond with a par value of AED 1000. The bond terms include annual coupon payments with a coupon rate of 11% and a maturity of 18 years. The bond has underwriting fees of AED48 and will be issued at a discount of AED -82. The tax rate is 23%. What will be the cost of the bond? Please write your final answer in the box below. Please provide complete details of the formula and steps in the space provided in the next question. Also, elaborate what will be the effect on bond cost if it was issued at a premium rather than a discount and a potential effect of increase/decrease in coupon rate on the cost of the bond.