If you expect interest rates to go to 5% next year, what happens to the price of the bonds?

A. Interest rates go down and all the prices will go up but some bonds will be discount bonds and some will be premium bonds.

B. Interest rates go down so that will change all the payments to reflect the 5% rate.

C. Interest rates go down and now all the bonds are premium bonds.

D. Interest rates go down and the investor has capital gains losses.

If you expect interest rates to go to 5% next year, which is the true statement?

A. The volatility of the bonds makes Bell South the best choice of bond to invest in, considering capital gains and if all the bonds are rated AAA.

B. The volatility of the bonds makes Dole the best choice of bond to invest in, considering capital gains and if all the bonds are rated AAA.

C. The volatility of the bonds makes Xerox the best choice of bond to invest in, considering capital gains and if all the bonds are rated AAA.

D. Cant tell which will have the greater capital gains.

If you expect interest rates to go to 5% next year, which provision could provide the firm with the opportunity to refinance their bonds?

A. the sinking fund

B. the call provision

C. the convertibility provision

D. the preemptive right provision

If you expect interest rates to go to 5% next year, Which statement best describes the relationship of the market rate and the price of the bond?

A. Market rates went down, so the price of the bond went up.

B. Market rates went down, so the price of the bond went down too.

C. Coupon rates went down, so the price of the bond went up.

D. Coupon rates went down, so the price of the bond went down too.

If you expect interest rates to go to 5% next year, Which statement best describes how the value of the cash flows of the bond are impacted?

A. Only the coupon interest payment is impacted as we still receive $1000 principal at the end of the bonds life.

B. Both the market rate payment and the principal are impacted.

C. Both the coupon payment and principal are impacted.

D. All three cash flows (market payment, coupon payment and principal) are impacted.

Bond Problem: Use the data provided and answer the following questions. 30 Points Coupon interest rate Years to maturity Bell South 6.375% 27 Dole 7.875% 12 Xerox 7.2% 11 Bonds par value $1000 a. Calculate the values of each of the bonds if your required rates of return is 7.2% From the 5 keys. Fill in the missing pieces. 6 points Bell South Work: Dole Work: Xerox Work: FV= FV = -1000 Pmt - Pmt = FV = -1000 Pmt = -78.75 N = 12 Ily - 72 N = 27 N = 11 lly - 7.2 Ily = Price = $903 Price = $ Price = Bond Problem: Use the data provided and answer the following questions. 30 Points Coupon interest rate Years to maturity Bell South 6.375% 27 Dole 7.875% 12 Xerox 7.2% 11 Bonds par value $1000 a. Calculate the values of each of the bonds if your required rates of return is 7.2% From the 5 keys. Fill in the missing pieces. 6 points Bell South Work: Dole Work: Xerox Work: FV= FV = -1000 Pmt - Pmt = FV = -1000 Pmt = -78.75 N = 12 Ily - 72 N = 27 N = 11 lly - 7.2 Ily = Price = $903 Price = $ Price =