PROBLEM 1 Firm BC management team is exploring the possibility to raise capital by issuance...
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Finance
PROBLEM 1
Firm BC management team is exploring the possibility to raise capital by issuance of the first Corporate Bond for a total nominal amount of Rp. 125 billion, having quarterly Coupon payment and a Coupon rate = 8% (fix interest). The Corporate Bond will be issued with a tenor of 10 years.
Based on the above parameters, calculate the Bond value following additional conditions defined as below:
a. Upon the end of year 2, year 7 and year 9 of the Bonds tenor; following a required rate of return set at 10%.
b. Upon the end of year 2, year 7 and year 9 of the Bonds tenor; following a required rate of return set at 6 %.
c. What specific of information can one conclude regarding the relationship between the value of the Bond and the corresponding time to maturity of the Bond using the answer you have provided for point a. and point b. above? Clarify your reasoning comprehensively in full details and further providing schematic graphics to illustrate the matter.
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