- This topic has 3 replies, 2 voices, and was last updated 9 years ago by
.
- Posts
What is the IRR of a 5 year unsecured bond with a coupon rate of 5%, redeemable at par, issued at 6% discount to par.
so..in f9, we were usually given the Market Value of a bond and that would be cashflow at time 0. so since i cd not find the market value i looked at the answer and found the following:
in this case, the cashflow at time 0 is taken as (94).
my question is: is (94) the market value if yes, can u explain since 94 is the purchase price .. i think
regards
94 is the issue price which is obviously unlikely to be the current market value.
If there is nothing else mentioned in the question (such as that the bonds are about to be issued) then I suppose there is not choice but to use 94, but I cannot see this being the case in the real exam.
- You must be logged in to reply to this topic.