Question

A bond was issued on 1st April 2014at par for $1000 bearing an interest rate of 8% per annum. The interest is payable at each year end on 31st March. The bond redeemable at the end of 10th year from the date of issue at 10% premium. At present i.e. on 25th March 2018, such bond can be purchased in open market at the price of $1,023. The investor expects a rate of return of !0% per annum. Identify the following: 1. Face Value 2. Issue Price 3. Coupon Rate 4.Coupon Payment 5.Maturity Date 6.Redemption Price 7.Market Value as on 25-03-2018 8.Intrinsic Value on 31-03-2018

Answer 1

Answer:

A bond was issued on 1st April 2014at par for $1000 bearing an interest rate of 8% per annum. The interest is payable at each year end on 31st March. The bond redeemable at the end of 10th year from the date of issue at 10% premium. At present i.e. on 25th March 2018, such bond can be purchased in open market at the price of $1,023. The investor expects a rate of return of !0% per annum. Identify the following: 1. Face Value 2. Issue Price 3. Coupon Rate 4.Coupon Payment 5.Maturity Date 6.Redemption Price 7.Market Value as on 25-03-2018 8.Intrinsic Value on 31-03-2018