400-600 words and include calculations showing ALL WORK!
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.
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