Question 6-19 Bond value and time – changing required return Lynn Pityana is considering investing in...

Question 6-19

Bond value and time – changing required return

Lynn Pityana is considering investing in either of two outstanding bonds.

The bonds both have R1,000 par values and 11% coupon interest rates and pay annual interest

Bond A has exactly five years to maturity and Bond B has 15 years to maturity

Calculate the value of bond A if the required return is (1) 8% and (2) 11% and (3) 14%

Calculate the value of bond B if the required return is (1) 8% (2) 11% and (3) 15%

From your findings in parts A and B complete the following table and discuss the relationship between time to maturity and changing required returns

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

I THINK, RATES SHOULD BE SAME : THERE IS SOME MISTAKE IN 3RD OPTION : 14% AND 15%, BOTH SHOULD BE SAME

jeff jeffy answered 1 year ago

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