Determine what is the current market price of the bond, Finance Basics

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1.  A company is trying to decide which one of two projects it should accept. Both projects have similar start-up costs. Project 1 will generate annual cash flows of $52,000 a year for 6 years. Project 2 will generate cash flows of $48,000 a year for 8 years. The company needs a 15 % rate of return. Which project should the company select and why?

2.  A bond has a $1,000 face value, a market price of $1,036, and pays interest payments of $70 every year. Determine what is the coupon rate?  

3.  A 5.5 % $1,000 bond matures in 7 years, pays interest semiannually, and has a yield to maturity of 6.23 percent. Determine what is the current market price of the bond?


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