Business Studies, asked by kennethwamiatu, 3 months ago

Upendo ltd wishes to take advantage of the new commercial paper now popular. It wishes to issue two debenture papers. Both bear coupons of 12% and the effective yield required on each is 20%. Paper A has a maturity of 10 years and paper B a maturity of 20 years. Both will be paying interest annually and Kshs. 100,000 at maturity. What is the price of each paper? If the effective yield on each paper rises to 24%, what is the price of each paper?

Answers

Answered by bigdashezada61

69

Upendo ltd wishes to take advantage of the new commercial paper now popular. It wishes to issue two debenture papers. Both bear coupons of 12% and the effective yield required on each is 20%. Paper A has a maturity of 10 years and paper B a maturity of 20 years. Both will be paying interest annually and Kshs. 100,000 at maturity. What is the price of each paper? If the effective yield on each paper rises to 24%, what is the price of each paper?

Answered by mutuas049

3

Answer:

39

Explanation:

Cost of Debentures = Interest(1-t) + (par value-Market value)/0.5(par value-market value)

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