MG Corporation issued 20-year bonds five years ago with a par value of RM1,000. The coupon rate is 14% and investors require a 10% return on these bonds.
a) How much interest does MG Corporation pay annually on each bond?
b) Will the bond sell at a discount, at par, or at a premium? Explain why?
c) Assume that coupon is paid annually, what is the intrinsic value of the bond?
d) What is the current yield on the bond?
e) Assume that coupon is paid semiannually, what is the intrinsic value of the bond?