expansion purposes. You decided to issue semi- annual R1 000 bonds which pay a coupon of 10% for a 15-year period. A year after the bonds were issued, the interest rate in the market increased b 1,5%. Required a) What was one bond worth one year after it wa first issued? b) If your company issued 1 500 bonds at par in t
expansion purposes. You decided to issue semi- annual R1 000 bonds which pay a coupon of 10% for a 15-year period. A year after the bonds were issued, the interest rate in the market increased b 1,5%. Required a) What was one bond worth one year after it wa first issued? b) If your company issued 1 500 bonds at par in t
Chapter6: Bonds (debt) - Characteristics And Valuation
Section: Chapter Questions
Problem 5PROB
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Transcribed Image Text:3.1 Your company was in need of R5 million for
expansion purposes. You decided to issue semi-
annual R1 000 bonds which pay a coupon of 10%
for a 15-year period. A year after the bonds were
issued, the interest rate in the market increased by
1,5%. Required
a) What was one bond worth one year after it was
first issued?
b) If your company issued 1 500 bonds at par in the
first year, how many would you still have to sell at
the new present value?
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