QUESTION 2 [35 MARKS] Consider the following information of Petronas Bond Description Petronas Bond Face value...

QUESTION 2 [35 MARKS]
Consider the following information of Petronas Bond
Description
Petronas Bond
Face value
RM1,000
Maturity
5 Years
Coupon rate
9.00% per annum
Compounding (m)
Semiannually
a) Assuming annual interest rate is 6.00% on the bond, calculate the value of the bond.

b) Illustrate the discounting cash flows using the Macaulay Duration Schedule.

c) Compute
i. Modified duration.

Expert Solution

(a) Value of the bond= RM1127.95

(b) Macaulay Duration= 4.19 years. Discounting cash flows shown in the screen shot below.

(c) (i). Modified Duration=4.07 years.

Detailed working as follows.

jeff jeffy answered 5 months ago

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