After graduation, you work as a Financial Analyst in a reputable multinational company in Kuala Lumpur. Your superior has assigned you a new task. You are required to analyse the following bonds.
Coupon rate per annum | 10% | 10%
Maturity in years | 15 | 10
Face value per bond | $1,000 | $1,000
Yield to maturity per annum | 11% | 13%
Current selling price per bond | $900 | $1,100
Based on the above information, you are required to:
a) Compute the current bond prices for both companies if the interest payment is once a year.
b) Based on the above result, provide your conclusion.
c) Discuss three main differences between conventional bond and Islamic bond
a) Bond price for Petrol Berhad
Annual interest payment =
Price of bond;
Bond Price for Shell Corporation
Annual Coupon interest=
Bond Price =
b) The bond by Petrol Berhad is a better one because it has a higher bond price value at the end of the maturation period compared to the bond by Shell Corporation.It is also less riskier compared to the one by Shell Corporation.
c)Differences between conventional and Islamic bonds