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Here are data on $ 1 , 0 0 0 par value bonds issued by Microsoft, GE Capital, and Morgan Stanley. Assume you are thinking

Here are data on $1,000 par value bonds issued by Microsoft, GE Capital, and Morgan Stanley. Assume you are thinking about buying these bonds. Answer the following questions:
a. Assuming interest is paid annually, calculate the values of the bonds if your required rates of return are as follows: Microsoft, 6 percent; GE Capital, 9 percent; and Morgan Stanley, 13 percent; where:
;MICROSOFT;GE CAPITAL;MORGAN STANLEY
Coupon interest rate;4.25%;3.25%;3.75%
Years to maturity;22;16;6
b. The bonds are selling for the following amounts
Microsoft $861
GE Capital $601
Morgan Stanley $723
What are the expected rates of return for each bond?
c. How would the value of the bonds change if (1) your required rate of return (rb) increased 2 percentage points or (2) decreased 2 percentage points?
d. Explain the implications of your answers in part c in terms of interest rate risk, premium bonds, and discount bonds.
e. Should you buy the bonds? Explain.
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