To prepare funding for the investment project, Cooper Technologies Ltd issued 20- year bonds to the public exactly five months ago. These bonds would pay semi-annual coupons at a rate of 14% pa.. The rate of return required by investors on these
instruments has been estimated at 12% p.a.. Each bond has a face value of $150,000.
a. Calculate today's price of each bond. ) b. Consider the current term structure as follows: corporate bonds with maturity from 1 years to 5 years yield 8% p.a., corporate bonds with maturity from 6 years to 9
years yield 10% p.a., and 10-year bonds and longer-maturity bonds yield 16% p.a..
Recalculate today's price of each bond.