Value of the bond at the present time

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Reference no: EM13214524

You 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.

Reference no: EM13214524

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