Problem 1: The market price is 900$ a 10 year bond (1000 $ par value)...
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Problem 1: The market price is 900$ a 10 year bond (1000 $ par value) that pays 8% annual interest, but makes interest payment on a semiannual basis (4 percent semiannually). What is the bonds yield to maturity? Picture the problem, decide on a solution strategy, solve and analyze. (25 points) Problem 2: Explain the differences between Eurobonds and Convertible Bonds. (25 points) Problem 3: A corporate bond matures in 25 years, pays an annual coupon rate of 8%, has a par value of $1,000 and a required rate of return of 5.90%. Picture the problem, decide on a solution strategy, solve and analyze. a. What is the current market value of this bond? (20 points) b. In two years, would you expect the bond price to increase or decrease from its current market value? Explain why. (5 points) Problem 4: Lactuca Company has bonds that mature in 9 1/2 years with a par value of $1,000. They pay a coupon rate of 12%. If the required rate of return on these bonds is 13%, what is the bond's value? Assume semiannual coupon payments. Picture the problem, decide on a solution strategy, solve and analyze.(25 points)
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