In: Finance
1. The Select Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L-Series has a maturity of 15 years, and Bond S-Series a maturity of 1 year.
a. What will be the value of each of these bonds when the going rate of interest is (1) 5%, (2) 8%, and (3) 12%? Assume that there is only one more interest payment to be made on Bond
b. Why does the longer-term (15-year) bond fluctuate more when interest rates change than does the shorter-term bond (1-year)?
2.SOP Ltd bonds have a par value of $1,000. The bonds pay semi-annual interest of $40 and mature in 5 years.
a. How much would you pay for SOP’s bond if your required rate of return is 10%?
b. How much would you pay if your rate of return is 8%?
3. SAH, Inc. has issued a 12% coupon rate bond that is to mature in nine years. The bond had a $1,000 par value, and interest is due to be paid semi-annually. If your required rate of return (yield to maturity) is 10%, what price would you be willing to pay for the bond?
SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE
SOLVED WITH BA II PLUS CALCULATOR