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Sir for part bii we have to find a coupon rate when the price of bond = $100 right?
I didn’t use any IRR or trial and error method.
I simply did this:
100(bond price)= (C*1.0385^-1)+(C*1.0446^-2)…….and so on.
C is the coupon rate that will result in the bond price 100.
Is this correct?
I have seen questions using this approach as well.
Yes it is correct.
Levante is not in the current edition of the BPP Revision Kit, but I do have the original exam question and answer.
The examiner shows both approaches in his answer and either approach gets full marks 🙂
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