RST PIC is a stock exchange listed manufacturing company. Following a decision made by the board to expand its manufacturing facilities, the company needs to raise additional finance amounting to K120million by way of a five year corporate bond issue. The proposed corporate bond will have a par value of K100 and will be redeemed at this par value at the end of year five. Existing funds were raised by way of a ten year bond which matures in three years "time. The existing bond has a coupon rate of4.75% and a nominal value of K100. The bond will be redeemed at this nominal value three years time from now and coupon payments are made annually. There will be sufficient funds to redeem the existing bond. The issue will significantly change the company's capital structure and as such, the credit rating will fall from the current AAA to A. the company's treasurer has been advised that this is still within the investment grade. Five government bonds are in issue, bond 1, bond 2, bond 3, bond 4 and bond 5. Each bond has a par value of K100 and is redeemable at the par value upon maturity. Coupon payments on each bond are made annually The following additional information is available in respect of each bond: Bond price Maturity term Annual coupon Rate Bond 1 Year 1 3.25% K99.90 Bond 2 Year 2 3.75% K98.75 Bond 3 Year 3 3.85% K97.80 Bond 4 Year 4 4.15% K96.50 RST PIC is a stock exchange listed manufacturing company. Following a decision made by the board to expand its manufacturing facilities, the company needs to raise additional finance amounting to K120million by way of a five year corporate bond issue. The proposed corporate bond will have a par value of K100 and will be redeemed at this par value at the end of year five. Existing funds were raised by way of a ten year bond which matures in three years "time. The existing bond has a coupon rate of4.75% and a nominal value of K100. The bond will be redeemed at this nominal value three years time from now and coupon payments are made annually. There will be sufficient funds to redeem the existing bond. The issue will significantly change the company's capital structure and as such, the credit rating will fall from the current AAA to A. the company's treasurer has been advised that this is still within the investment grade. Five government bonds are in issue, bond 1, bond 2, bond 3, bond 4 and bond 5. Each bond has a par value of K100 and is redeemable at the par value upon maturity. Coupon payments on each bond are made annually The following additional information is available in respect of each bond: Bond price Maturity term Annual coupon Rate Bond 1 Year 1 3.25% K99.90 Bond 2 Year 2 3.75% K98.75 Bond 3 Year 3 3.85% K97.80 Bond 4 Year 4 4.15% K96.50
