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Jane is considering an investment in one of the two corporate bonds. both bonds have...

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Accounting

Jane is considering an investment in one of the two corporate bonds. both bonds have par value of K100 and pay coupon interest rate on an annual basis. The market price of the first bond is K107.97. Its coupon rte is 6% and is due to be redeemed at par in five years time. the second bond is about to issued with a coupon rate of 4%, and will also be redeemable at par in five years time. Both bonds are expected to have the same gross redemption yields (yields to maturity) when choosing bonds for investment, Jane considers duration to be an important factor.

a)Calculate the macaulay duration of both bonds that jane is considering for investment

b)explain and discuss the relationship between coupon rate, yield to maturity and the price of redeemable corporate bond

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