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Investment advice and corporate finance
Module 12Investment Management and Corporate FinanceA three-year bond pays a 4% coupon semi-annually and yields 5% a year (2.5% per half-year). What is its price per RM100 face value?
With semi-annual coupons, discount six coupons of RM2 and the RM100 at 2.5% a period: price = Σ 2 ÷ 1.025^t (t = 1 to 6) + 100 ÷ 1.025^6 = RM97.25. RM97.28 is the price with annual coupons at 5%, ignoring the payment frequency. RM100.00 would need the coupon to equal the yield. RM102.72 reverses the discount into a premium. Source: SIDC Module 12 Study Outline (Jul-Dec 2026) Section 5 Topic 9 Debt Financing; F. J. Fabozzi, Bond Markets, Analysis and Strategies (as at October 2026).
Using annual periods for a semi-annual bond.
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