a. Using the Price function, calculate the intrinsic value of each bond. Are any of...
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Finance
a. Using the Price function, calculate the intrinsic value of each bond. Are any of the bonds currently undervalued?
b. Using the Yield function, calculate the yield to maturity of each bond using the current market prices.
c. Calculate the duration of each bond.
d. Which bond would you rather own if you expect market rates to fall by 2% for all bonds? What if rates will rise by 2%? Why? (Hint you want to choose the bond that gives the most % change in price when rates fall and choose the bond that gives the least % fall in price when rates rise.)
2. After recently receiving a bonus, you have decided to add some bonds to your investment portfolio. You have narrowed your choice down to the following bonds (assume semiannual payments): Bond A Bond B Bond C Settlement Date 2/15/2017 2/15/2017 2/15/2017 8/15/2027 4.00% 5/15/2037 Maturity Date Coupon Rate Market Price 6/15/2047 6.25% 7.40% $975 Face Value $1,000 4.35% $1,062 $1,000 5.50% $1,103 $1,000 6.50% Required Return
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