The value of bond 3 is RM1137.65
This bond 3 is selling at a premium since the coupon rate(14%) is higher than the required rate(12%) orSince the bond value(1137.65) is more than its par value(1000)
Bond 3:
Coupon rate = 14% = 0.14
Coupon payment = Coupon rate*Face value/ Number of compounding periods in a year
CPN = 0.14*1000/2 = 140/2 = 70Number of years till maturity = 15 years
Number of periods till maturity = N = 15*2 = 30
We know that the price of the bond is given by the following formula,
P = CPN*(1/y)*(1-(1/(1+y)^N)) + FV/(1+y)^N
Substituting the given values in the above equation,
we get
P = 70*(1/0.06)*(1-(1/(1+0.06)^30)) + 1000/(1+0.06)^30
P = 70*(1/0.06)*(1-(1/(1.06)^30)) + 1000/(1.06)^30
P = 70*(16.6667)*(1-(0.943396)^30) + 1000*(0.943396)^30
P = 70*(16.6667)*(1-0.17411) + 1000*(0.17411)
P = 70*(16.6667)*(0.82589) + 1000*(0.17411)
P = 963.54 + 174.11
P = 1137.65
Learn about the rate of return here:brainly.com/question/24301559#SPJ1
