How much should you pay for a $1,000 ARA Corporation bond? 2. If you are given RM90,000, how many units of bond can you purchase? 3. What is the yearly interest income for this bond if I purchase it with RM90,000? 4. You plan to reinvest the coupon interest at 12% rate of return per annum. Calculate the value of the reinvestment, what is the figure will you get at the end of 7th years with your principle (b) Find the duration of the bond using a table with the given information.
(a) The ARA Corporation bonds have a coupon of 14%, pay interest semi-annually, and they will mature in 7 years. Your required
1. How much should you pay for a $1,000 ARA Corporation bond?
2. If you are given RM90,000, how many units of bond can you purchase?
3. What is the yearly interest income for this bond if I purchase it with RM90,000?
4. You plan to reinvest the coupon interest at 12% rate of return per annum. Calculate the value of the reinvestment, what is the figure will you get at the end of 7th years with your principle
(b) Find the duration of the bond using a table with the given information.
Duration = Total PV of CF / current bond value
Face value = RM1000
Maturity = 6 years
Coupon = 6%
Bond Value = RM1020
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