Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

Here are data on $1,000 par value bonds issued by Micorsoft, Ford, and Xerox at the end of 2008. Assume you are thinking about buying these bonds as of January 2009. Answer the following problems:

a. find out the values of the bonds if your required rates of return are as follows: Microsoft, 6 percent; Ford, 15 percent; Xerox, 10 percent; where

MICROSOFT FORD XEROX
Coupon interest rate 5.25% 7.13% 8.00%
Years to maturity 30 25 16

b. At the end of 2008, the bonds were selling for the following amounts:

Microsoft $1,009.00
Ford $ 610.00
Xerox $ 805.00

What were the expected rates of return for each bond?

c. How would the value of the bonds change if (1) your required rate of return (rb) increased 2 percentage points or (2) decreased 2 percentage points?

d. describe the implications of your answers in part b in terms of interest rate risk, premium bonds, and discount bonds.

e. Should you buy the bonds? describe.

 

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M924272

Have any Question? 


Related Questions in Basic Finance

A small firm makes three similar products which all follow

A small firm makes three similar products, which all follow the same three-step process, consist- ing of milling, inspection, and drilling. Product A requires 12 minutes of milling, 5 minutes for inspection, and 10 minut ...

1 what are the main reasons that corporations may choose to

1. What are the main reasons that corporations may choose to own real estate? 2. Why is the value of corporate real estate often considered "hidden" from shareholders? 3. Why is the cost of financing with a sale-leasebac ...

There is an old saying on wall street sell in may and go

There is an old saying on Wall Street: "Sell in May and Go Away." This saying means that stock prices typically do not do well over the summer months. A blogger at the Wall Street Journal explains the reasoning: What's u ...

1 how did the cold war era contribute to the evolution of

1. How did the Cold War era contribute to the evolution of modern emergency management? 2. What disaster led to the creation of the National Flood Insurance Program? 3. Describe the events of the 1970s that led to the cr ...

The net present value method and the internal rate of

The net present value method and the internal rate of return method may produce different decisions when selecting among mutually exclusive projects. What is the source of this conflict? A shoe manufacturer is considerin ...

1 why is it important to focus on total returns when

1. Why is it important to focus on total returns when measuring an investment's performance? 2. Why do real returns matter more than nominal returns? 3. Under what conditions will the components of a bond's return have t ...

Financial assignmentpart 1 at november 30 2012 silver

Financial Assignment Part 1: At November 30, 2012, Silver Traders Company had the following trial balance. There is detailed information on the next page about December 2012 transactions that need to be recorded. Silver ...

A researcher was interested in the effects of weather on

A researcher was interested in the effects of weather on cognitive performance. He tested participants on either sunny or cloudy days, and obtained the following scores on a 10-item test of cognitive performance. Using t ...

In todays rapidly changing and competitive business world

In today's rapidly changing and competitive business world, it is in important to stay current with financial news and events. Visit a financial-related website like Forbes.com, CNNMoney.com, TheStreet.com, Bloomberg.com ...

A congresswoman introduces a bill to outlaw credit

A Congresswoman introduces a bill to outlaw credit rationing by banks. The bill would require that every applicant be granted a loan, no matter how high the risk that the applicant would not pay back the loan. She defend ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro