o-Anne just bought 200 bonds at a purchase price of R1 043.70 each. The bonds will...

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Finance

o-Anne just bought 200 bonds at a purchase price of R1 043.70each. The bonds will mature in 7 yearsâ€™ time and have a face valueof R1 000.00. The coupon rate is 11% and is paid semi-annually.Answer the questions that follow:
1.1 Calculate the prevailing interest rate.
1.2 If the prevailing interest rate is 12%, what would happen tothe price of the bond?
1.3 If Lee-Anne bought the bonds at R1 043.70 and the prevailinginterest rate changes to 12%, what would the capital gains yieldbe?
Lee-Anne bought the bonds at R1 043.70 and after four years shedecides to sell the bonds while the prevailing interest rate is 9%.Answer the following questions relating to this scenario:
1.4.1 Calculate the capital gains yield.
1.4.2 Calculate the current yield.
1.4.3 Calculate the total Rand return.
Note on the questions above. Can you provide me with a moredetailed calculation as to how you got to your answers for thequestions and not just the answer after formula has been provided.Thank you

Answer & Explanation Solved by verified expert

3.8 Ratings (446 Votes)

11 Calculation of prevailing interestratePrice of bond BO Cashflows PVIFA i ryears Redemption value PVIF i ryearsWherei interest rater period in yearsPVIF present value interest factorPVIFA present value interest factor annuityDetailedexplanationplugyour numbers into the interest formula to get your rateconvertthe interest rate to a percentage by multiplying it by 100 refer toyour most See Answer

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