1. (Bond valuation) Bellingham bonds have an annual coupon rate of 15 percent and a par value of $1000 and will mature in 15 years. If you require a return of 16 percent, what price would you be willing to pay for the bond? What happens if you pay more for the bond? What happens if you pay less for the bond?

2. (Bond valuation) You own a 20-year, $1000 par value bond paying 8 percent interest annually. The market price of the bond is $925, and your required rate of return is 10 percent.

a. Compute the bond's expected rate of return.

b. Determine the value of the bond to you, given your required rate of return.

c. Should you sell the bond or continue to own it?

3. (Bond valuation) Hamilton, Inc. bonds have a coupon rate of 9 percent. The interest is paid semiannually, and the bonds mature in 14 years. Their par value is $1000. If your required rate of return is 15 percent, what is the value of the bond? What is the value if the interest is paid annually?