A

B

C

D

E

F

G

H

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rs of the ongization's pension fund management division. The unions that represent the GHC hospital staff hare requested an inrestment seminar so that they better understand the decisions being made on behalf of their members. Strother and Tibbs, who will make the actual presentation, have asked you to help them by answering the following questions.

a$.$ What is the value of a ten$-$year, $$1,000$ par value bond with a $10$ percent annual coupon if its required rate of return is $10$ percent?

b$.$ What would be the value of the bond described in question a$.$ if$,$ just after it had been issued, the expected inflation rate rose by $3$ percentage points, causing investors to require a $13$ percent return? Would we now have a discount or a premium bond?

c$.$ What would be the value of the bond described in question a$.$ if$,$ just after it had been issued, the expected inflation rate fell by $3$ percentage points, causing investors to require a $7$ percent return? Would we now have a discount or a premium bond?

d$.$ What would happen to the value of the ten$-$year bond over time if the required rate of return remained at $13$ percent, remained at $7$ percent, or remained at $10$ percent? Graph your results using the table below:

$\backslash$table$[[23,,$Value of Bond in Given Year:$],[24,N,7\%,$Ighya,$1396],[25,0,,,],[26,1,,,],[27,2,,,],[28,3,,,],[29,4,,,],[30,5,,,],[31,6,,,],[32,7,,,],[33,8,,,],[34,9,,,],[35,10,,,],[36,,,,]]$

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$38$ ANSWER

$39$ a$.$

$40$ Going rate, $r$

$41$ Years to maturity

$42$ Annual payment

$43.$ Par value $=FV$

$44$ Coupon rate