Tag (SQ): Irredeemable bonds

Assume that bond investors in Ama Industries require a return of 9% per year on their investments.

Required:

(A) Estimate the market value of irredeemable 7.5% bonds that pay interest annually.

(B) Estimate the market value of bonds paying coupon interest of 6% per year annually, that are redeemable at par in four years’ time.

(C) Estimate the market value of bonds paying coupon interest of 10%, redeemable at par after three years, where interest is payable every six months.

(D) Estimate the market value of a convertible bond with a coupon of 5% and interest payable annually; these bonds are convertible after three years into equity shares at the rate of 20 shares for every GH₵100 nominal value of bonds. The expected share price in three years’ time is GH₵7.