Intro The Univarsty of Caildornia has two bonds outstanding Both issues have the same credit rating. s tace value of \$1,000 and s ecepon rate of 6%. Coupens ace poid fwice a year. Bond A matures in 1 year, whle bond B matures in 20 yerer. The narkit interest rate for similar bonds a 124. Part 1 - Attenge vano lor 10 pas. What is the price of bond A ? Conact 8 We need to caloulate the present values of 2 cash fows even though the bond has onty 1 year to mahurty, since bonds typically pay interst sam-arnaly. As a resiat, we abo have to adjust the coscourt rate to hat the given market irtiret rate and find the coupon payment as 1/251,000 " coupon rate. P4=1+0.0630+(1+0.05)21,060=945 Using a franeial calculator: \begin{tabular}{|c|c|c|c|c|c|} \hline & N & IY & PV & PMT & PV \\ \hline houts & 2 & 6 & & -30 & 1,000 \\ \hline Compeste & & & 945 & & \\ \hline \end{tabular} Part 2 E E Atternot 370 for 10 pts What is the price of bond B? Part 3 B F Artenct tho for 10 pla. Now assurie thet yields increase to 15%. What is the prios of bond A