Consider that Mr.Abdulaziz decided to invest Al Maha Group of Companies that is offering a bond that has a par value of R.O 55,000 and pays 5% coupon rate at the end of each year in coupon payments and has 12 years remaining until maturity. Assume that the prevailing annualized yield of the bond is 9%, with additional data of ( present value annuity is = 5.328 and present value is 0.356). Answer the required questions

1. If the coupon rate changed to 6.5%, how much would be the coupon payment

OMR 3,575OMR 4,500OMR 3000OMR 3,500

2. Calculate the PVBo if the investor will decide to invest in Al Maha Group of Companies using method 3.

OMR 36,500OMR 38,457OMR 34,232OMR 45,857

3. What will happen if the annualized yield of the Bond is reduced to 3%?

It is good for Mr. Ali, since he will have more returnIt is not good to Mr. Ali since he will have less returnThe PVBo will be higher and Mr. Ali will pay lessThe PVB0 will be less and Mr. Ali will pay more

4. Mr. Abdulaziz should prefer bond over stock because:

Bond has a longer maturity period than stocks.Bond is offering fluctuating interest unlike stocks which is fixed.None of the optionsBond has lesser risk than Stocks.

5. If the computed price of the bond is 45,000, which is less than the par value, what category of bond is it?

Discount BondPar BondNone of the given optionPremium Bond