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Radius Corporation has issued a new series of bonds on 1 January 2021. The bonds were sold at par, $1,000, pay 12 percent coupon rate
Radius Corporation has issued a new series of bonds on 1 January 2021. The bonds were sold at par, $1,000, pay 12 percent coupon rate and mature on 31 December 2050. Coupon interest payments are made on 30 June and 31 December during the duration of bond. i. Calculate Yield to Maturity (YTM) and Effective Annual Rate (EAR) given that the bonds are sell for $922.38 on 1 July 2026. (6 marks) ii. Assuming that the level of interest rates had increase to 9 percent, what is the price of the bond on 1 January 2026, five years later? (4 marks)
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