(Bond valuation)

Bellingham bonds have an annual coupon rate of 15 percent and a par value of

$1,000 and will mature in 10 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?

a. The price you would be willing to pay for the bond is

Bond valuation) You own a 15-year, $1,000 par value bond paying 7 percent interest annually. The market price of the bond is $850, 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?

a. What is the expected rate of return of the 15-year, $1,000 par value bond paying 7 percent interest annually if its market price is $850?

(Round to two decimal places.)

(Bond valuation)

Hamilton, Inc. bonds have a coupon rate of 11 percent. The interest is paid semiannually, and the bonds mature in

9 years. Their par value is $1,000. If your required rate of return is 13 percent, what is the value of the bond? What is the value if the interest is paid annually?

a. If the interest is paid semiannually, the value of the bond is