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Santa Maria is contemplating on buying some corporate bonds. She asked her financial advisor, who gave her the following information. The corporate bond has a
Santa Maria is contemplating on buying some corporate bonds. She asked her financial advisor, who gave her the following information. The corporate bond has a face value of K100 and matures in 40 years. The bonds have 10 years moratorium, then pays 8 percent coupon payment for 10years, thereafter makes no coupon payment for 10yrs, finally pays 9 percent coupon payments for the last 10 years. The yield to maturity for this bond is 4 percent. REQUIRED: a) Advice Santa Maria the current bond price (V). (12 marks)
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