In: Finance
Miller Corporation has two bonds outstanding. Both bonds have
coupon rates of 10% and one has a maturity of 10 years, while the
other has a maturity of 20 years. Interest is paid semi-annually.
Calculate the following for both bonds.
A) If market rates for bonds of equal risk fell to 8% what would be
the maximum price an investor would be willing to pay for these
bonds?
B) If market rates for bonds of equal risk remained at 10%, what
would be the bonds' current worth?
C) If market rates for bonds of equal risk rose to 12%, what would
be the bonds' theoretical value?
Bond A: 10 years semiannually = 20 periods
Bond B: 20 years semiannually = 40 periods
please need detail answers with workings