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I have worked out question 31, current market value of loan notes as 105/100 * 10,000 cause the questions states that ‘loan notes are redeemable in four years time at a 5% premium.’
But that is not the way that we calculate the current market value!!
The market value is the present value of the future receipts discounted at the investors required rate of return. However this is not needed in this question because you are told the MV of the loan notes in the question!!
All of this is explained in detail in my free lectures – they are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.
There is little point in attempting past exam questions without studying first! 🙂
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