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Work it out

27 Feb

ou need to present to your client, Alice Cartwright, some investment options for her to choose from. Her choices are between the following 2 bonds:

Bond Description Face Value Coupon Rate Years to Maturity
Bond A corporate bond in ABA company $1,000 10% coupon 12 years, paying annual payments
Bond B corporate bond in ABA company $1,000 10% coupon 2 years, paying annual payments

For each bond, answer the following questions:

  • What is the valuation of the bond if the market interest rates are 12%?
  • What is the valuation of the bond if the market interest rates are 6%?
  • What is the valuation of the bond if the market interest rates are 2%?
  • What is the value of the bond at the present time?
  • What will the bond be worth at maturity?
  • Are there differences in bond prices? If so, explain why.
 
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Posted by on February 27, 2017 in Academic Writing

 

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