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sub part (i): it says ‘coupon of 5% but at a discount or a premium’ ….
now, by ‘discount or a premium’, i took it to mean he is talking about whether the redemption should be at par or at a premium.
in the answer he assumes that the redemption is at par. why is he doing this?
( i have a follow up so please dont close the thread)
regards
‘Discount or premium’ is not referring to the redemption. The question says “Issue the new bond at a fixed coupon of 5% but at a premium or a discount”, so instead of issuing at par they will issue at either less or more than at par.
Redemption is always assumed to be at par unless specifically told otherwise.
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