BOND Exercise 1 A company has two bond issues outstanding. Both bonds pay $100 annual interest and $1,000 at maturity. Bond L has a maturity of 15 years; Bonds S has a maturity of 1 year. Calculate the value of the two bonds under the following market interest rates: a) When the going rate of interest is 5 %7 b) When the going rate of interest is 8 % ? c) When the going rate of interest is 12 %? Bond L 15 yrs 5%, 8 % , 12 % Bond S 1 yr 5% , 8 % , 12 % 100 n 100 1,000 FV 1,000 PV= PV= a) 5 % b) 8 % c) 12 % BOND Exercise 2 A firm sells an issue of $1,000 face value bonds due in 10 years with a 10 % coupon rate and annual payments. The market rate for bonds of this type is 9.95 % . A. At what price will the bond sell? B. Two years later, market rates for this type of bond have fallen to 7 %. At what price will the bonds sell? C. Suppose instead, that two years later, market rates had risen to 11%. At what price would the bonds sell