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You are required to show your work. Providing answers alone will not get you full credit. Please round all answers and intermediate results to
You are required to show your work. Providing answers alone will not get you full credit. Please round all answers and intermediate results to 2 decimal places, unless further specified. Question 1 (13 marks) You are given the following table that shows the characteristics on different types of bonds: Coupon rate (%) Bond A Inflation rate + Bond B 2% 2.5% (annual Bond C 0% Bond D 5% (semi- annual payment) payment) Issuer Horus Bank Red Sea Ltd. US Government US Government Current 100% 96% 98% ?? market price Tenor 5 years 3 years 6 months 15 years Special feature N/A Bond holders get the right to convert the bond N/A N/A into shares of Red Sea Ltd. at maturity. (a) According to the characteristics of bonds A to D, explain and name the bonds A to D. (8 marks) (b) Suppose the yield to maturity of bond D is 3.5% and face value equals to $1,000, calculate the current market price of bond D. Please round the answer and intermediate results to 4 decimal places (5 marks)
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