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YZ Co wants to issue a five-year redeemable bond with an annual coupon of 4%. The...

YZ Co wants to issue a five-year redeemable bond with an annual coupon of 4%. The bond is redeemable

at par (GHS100). Tax can be ignored.

The annual spot yield curve for this risk class of bond in the financial press is given as:

One-year                              3.3%

Two-year                              3.8%

Three-year                           4.2%

Four-year                             4.8%

Five-year                              5.5%

Required

Using the information above, calculate:

(a) The expected price at which the bond can be issued (2.5 marks)

(b) The yield to maturity (YTM) of the bond (2.5 marks)

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