The Government of Ghana has a budget deficit of GHS2billion for the FY-2022 and wishes to finance this deficit with a 7-year bond. Due to the recent downgrade of Government of Ghana bond issuers default rate, the government is contemplating whether investors would subscribe to the bond or not. The downgrade is making the government pay more coupon rates currently at 2 20% on the face value of the bond issue. Ordinarily, a bond of this nature should have attracted a far lower coupon rate than it currently had to pay. The yield to maturity (YTM) of this bond is also perked at 15%. The bondholders are expected to receive a coupon payment on a semi-annual basis.

Requirements

a. Determine the price of the bond?

b. Based on the bond price determined in (a), what type of bond did the Government of Ghana issue? c. What are some of the risks associated with this bond based on the current bond ratings in Ghana? d. Name THREE international organizations that provide sovereign ratings of Ghana bonds?