Bonds and Convertible Bond Features - Use the following information about the General Electric bond to answer the questions below;

1. What is the current market price of the bond? What is the current yield?
2. What is the credit risk of this bond? What is the market risk of this bond?
3. What is the stripped value of the bond?
4. What is the intrinsic value of the last three coupons?
5. What is the Macaulay duration of this bond?
6. What would happen to the Macaulay duration of this bond if it paid interest annually, quarterly show your calculations you may wish to build another spreadsheet or two.
7. What is the Modified duration of this bond?
8. If the structure of the bond is changed so that the principal payment is $125 per period, rather than a one-time bullet repayment in period 8, how would this change the duration result? Show your work.
9. Why have Callable bonds been out of fashion for the last twelve years?

$ 1,000.00 $ 50.00 or 10% per annum Face Amount of Bond = Semi - Annual Coupon Amount = Required Yield = Maturity in Years = Number of Coupon Payments = 15.00% per annum 4 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 1 2 3 4 5 6 7 8 Period in years Semi-annual period Interest Payment Principal Payment Total Cash Flow $ 50.00 50.00 $ 50.00 $ 50.00 $ 50.00 $ 50.00 $ 50.00 $ 50.00 $ 1,000.00 $ 50.00 $ 50.00 $ 50.00 $ 50.00 $ 50.00 $ 50.00 $ 50.00 $ 1,050.00 $ 1,000.00 $ 50.00 or 10% per annum Face Amount of Bond = Semi - Annual Coupon Amount = Required Yield = Maturity in Years = Number of Coupon Payments = 15.00% per annum 4 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 1 2 3 4 5 6 7 8 Period in years Semi-annual period Interest Payment Principal Payment Total Cash Flow $ 50.00 50.00 $ 50.00 $ 50.00 $ 50.00 $ 50.00 $ 50.00 $ 50.00 $ 1,000.00 $ 50.00 $ 50.00 $ 50.00 $ 50.00 $ 50.00 $ 50.00 $ 50.00 $ 1,050.00