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1. Nancy is considering two bonds for investment. Bond A has semiannual coupons and a rate of 7.25% with four years to maturity. Bond B

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1. Nancy is considering two bonds for investment. Bond A has semiannual coupons and a rate of 7.25% with four years to maturity. Bond B pays annually with a coupon rate of 6.75% and 9 years to maturity. Both bonds have face values of $1,000. The rate in the marketplace on bonds in a similar risk category is 7%. Bond A Bond B What is the PRESENT VALUE of the coupon stream? What is the PRESENT VALUE of the face value? What is the TOTAL VALUE of the bond? If both bonds are showing in the WSJ at 99, what should Nancy do? Buy bond A only Buy bond B only Buy both of them. Buy neither

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