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Estimate the duration of the emc investment

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Reference no: EM133030981

Problem - Recently, EMC Bank Berhad issued two bonds on behalf of the bank's subsidiaries, EMC Investment Berhad and EMC Insurance Berhad. Both of the bonds have a face value of RM5 million and mature in 5 years. The coupon rate of bond EMC Investment Berhad is 10% and the coupon rate of bond EMC Insurance Berhad is 12%. Both of the bonds are sold with a yield to maturity of 12 percent.

i. Estimate the duration of the EMC Investment Berhad and EMC Insurance Berhad bonds.

ii. Based on two bonds issued by EMC Bank Berhad, explain the relationship between duration and the relative frequency of interest payments.

Reference no: EM133030981

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