FIN 331 Excel for Bond Valuation Case

The president of your firm is interested in investing some of your corporations money in bonds. You went to the bond screener in Yahoo! Finance and narrowed the possibilities down to two bonds both maturing on June 15, 2030. You also determined the prevailing market rate on bonds similar to these two is 6%. The two bonds you selected were:

Makin Bakin Corporation bond with a 5.25% annual coupon and a $1,000 face value.

Froogle Corporation bond with a 7.50% annual coupon and a $1,000 face value.

In order to compose a memo to the president, you first will calculate the price of each bond (use June 15, 2018

as your purchase or settlement date). In your memo, explain why these prices are so different and why you would ever pay more than face value for a bond.