Answer Happy

Question 2 Mrs Lebene Owusuvi invested GHS 274,240 for a 3-year bond with an interest rate of 20.85%. the issuer has promised to pay a semi-annual coupon till maturity. Following an insight into Mrs Owusuvi investment experience, Mr. Oracle Razak observed that Mrs Owusuvi purchased a bond at the price when it was first issued. Therefore, he has express the willingness to also purchase as it is now trading in the open market. However, the interest rate has changed to 18.25% at the open market. Page 1 o
The bond was issued on 1st September 2021 and the next coupon payment date is 1" March 2022, Mr. Razak decided to purchase the bond at the open market on 7 December 2021. a) Calculate the price of the bond when Mrs Owusuvi purchased the bond. b) Calculate the actual price that Mr Razak would pay when he purchases it at the open market. c) Explain your observations of the two situations. d) Calculate the duration for the two sets of payments in the case of Mrs Owusuvi and Mr Razak. e) Explain the concept of duration to them. f) Discuss any three factors that may affects the safety of the bond.