Here are data on ?$1,000 par value bonds issued by? Microsoft, GE? Capital, and Morgan Stanley....

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Finance

Here are data on ?$1,000 par value bonds issued by? Microsoft,GE? Capital, and Morgan Stanley. Assume you are thinking aboutbuying these bonds. Answer the following? questions:
a. Assuming interest is paid? annually, calculate the values ofthe bonds if your required rates of return are as? follows:Microsoft, 5.5 percent; GE? Capital, 16.5 ?percent; and Morgan?Stanley, 12? percent; where:
MICROSOFT
GE CAPITAL
MORGAN STANLEY
Coupon interest rate
?????
5.25%
????????
7.50%
????
8.00%
Years to maturity
???????????
26???????????
????????????
22?????????
????????????
18????????????
b. The bonds are selling for the following? amounts:Microsoft $1,057 GE Capital $547 Morgan Stanley $809
What are the expected rates of return for each? bond?
c. How would the value of the bonds change if? (1) your requiredrate of return increased 2
percentage points or? (2) decreased 2 percentage? points?
d. Explain the implications of your answers in part ?(c?) interms of interest rate? risk, premium? bonds, and discountbonds.
e. Should you buy the? bonds? Explain.

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3.8 Ratings (484 Votes)

aMicrosoftFV 1000R 0055N 26PMT 005251000 525Using excel function PV PVRNPMTFVPV0055265251000 96584GE CapitalFV 1000R 0165N 22PMT 00751000 75Using excel function PV See Answer

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Transcribed Image Text

Here are data on ?$1,000 par value bonds issued by? Microsoft,GE? Capital, and Morgan Stanley. Assume you are thinking aboutbuying these bonds. Answer the following? questions:a. Assuming interest is paid? annually, calculate the values ofthe bonds if your required rates of return are as? follows:Microsoft, 5.5 percent; GE? Capital, 16.5 ?percent; and Morgan?Stanley, 12? percent; where:MICROSOFTGE CAPITALMORGAN STANLEYCoupon interest rate?????5.25%????????7.50%????8.00%Years to maturity???????????26???????????????????????22?????????????????????18????????????b. The bonds are selling for the following? amounts:Microsoft $1,057 GE Capital $547 Morgan Stanley $809What are the expected rates of return for each? bond?c. How would the value of the bonds change if? (1) your requiredrate of return increased 2percentage points or? (2) decreased 2 percentage? points?d. Explain the implications of your answers in part ?(c?) interms of interest rate? risk, premium? bonds, and discountbonds.e. Should you buy the? bonds? Explain.

MICROSOFT	GE CAPITAL	MORGAN STANLEY
Coupon interest rate	????? 5.25%	???????? 7.50%	???? 8.00%
Years to maturity	??????????? 26???????????	???????????? 22?????????	???????????? 18????????????