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Hi sir
Question b, the liability element.
Why year 3 is 100m x (100m x6%) x100m instead of 100m x 6% like the previous year.
ThxHi,
In the third year we assume that the bond is redeemed entirely for cash and so need to add the par value of the bond to the interest payable when working out the present value of the future cash flows.
Thanks
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