Question 2 (25 marks) Part I Three years ago, MIRA Ltd. raised $55 million by...
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Question 2 (25 marks) Part I Three years ago, MIRA Ltd. raised $55 million by issuing a 15-year bonds at par that carry a coupon rate of 8% payable semi-annually. Its current bond price is $920. Sam owns 500 bonds of MIRA Ltd. and will sell them today if this bond fails to earn an effective annual return of 10 percent. REQUIRED a) How many bonds did MIRA Ltd. issue? b) Calculate the current yield of this bond. Is this a premium bond or discounted bond today? Explain your answer without any calculation. [within 20 words] c) Based on the above information, will Sam sell 500 bonds of MIRA Ltd.? Explain within 30 words. Show your workings. d) As MIRA Ltd. is unable to pay the contractual interest on its bond in a timely manner. Moody's bond rating agency downgrades its bond rating from B to Caa. Name this investment risk. What is the likely effect on MIRA Ltd.s bonds? Briefly explain within 100 words. Part II Mark received a call about a $280,000 special prize in the form of accumulated interest that he won from a newly launched Virtual Bank. He needs to deposit $500,000 that earns an annual interest rate of 30% compounded monthly, how long does Mark take to withdraw $780,000
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