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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

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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, 8 percer GE Capital, 17.5 percent; and Morgan Stanley, 12 percerd; where: b. The bonds are selling for the following amounts: Microsoft $529 GE Capital $317 Morgan Stanley $894 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 (ro) increased 2 percentage points or (2) decreased 2 c. How would the value of the bonds change if (1) your required rate of return (ro) 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. 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, 8 percer GE Capital, 17.5 percent; and Morgan Stanley, 12 percerd; where: b. The bonds are selling for the following amounts: Microsoft $529 GE Capital $317 Morgan Stanley $894 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 (ro) increased 2 percentage points or (2) decreased 2 c. How would the value of the bonds change if (1) your required rate of return (ro) 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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