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(1) 2-year Singapore Government Securities (SGS) bond Standard & Poors AAA rated Coupon rate 3.125%...

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Accounting

(1) 2-year Singapore Government Securities (SGS) bond Standard & Poors AAA rated Coupon rate 3.125% per annum Quarterly coupon payment Par value is $100

(2) 20-year Singapore Government Securities (SGS) bond Standard & Poors AAA rated Coupon rate 4.1% per annum Semi-annual coupon payment Par value is $100

(3) 20-year Company ABC bond Standard & Poors BBB rated Coupon rate 6% per annum Annual coupon payment Par value is $100

(a) Illustrate the purpose of SGS bonds and explain Why there is a higher coupon yield for 20-year bond as compared to that of 2-year bond from the same bond issuer SGS.

(b) Explain and provide answers on: Why there is a wide coupon yield gap between 20-year SGS and 20-year ABCs bonds.

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