Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › GNT Dec 11/pilot papet
- This topic has 7 replies, 3 voices, and was last updated 8 years ago by
John Moffat.
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- May 29, 2015 at 4:07 pm #250288
Sir in this question 6% bond are redeemed at par in five years time.So in fifth year it is
1060×1.042^-5,my question is if instead of at par the question says redeemed at premium or discount what will be the figure in place of 1060. ThanksMay 29, 2015 at 7:05 pm #250318Of the 1,060 in 5 year time, 1,000 is the repayment and 60 is the interest.
If they were going to be repaid at a premium of (say)10%, then the repayment would be 1,100 and the interest 60, so a total of 1160.
The discount factor for 5 years at 1.042% would be unchanged.
May 29, 2015 at 10:17 pm #250367Thank you sir.
May 30, 2015 at 9:20 am #250455You are welcome 🙂
October 21, 2015 at 8:21 pm #278262They have used 5% and 4% discount rate but i have tried 5% and 10% discount rates and got the same duration but i am getting a difference of 10 in market price of first bond compared to the price given in question. Do tell me if my approach is not correct.
October 22, 2015 at 7:39 am #278321Your approach is fine (the difference occurs because IRR’s are always only approximate).
October 22, 2015 at 7:44 am #278324Thank you Sir 🙂
October 22, 2015 at 8:15 am #278339You are welcome 🙂
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