PART A:

Koy Corporation's 5-year bonds yield 12.50%. The real risk-free rate is 3.0%, the inflation premium for 5-year bonds is 1.75%, the liquidity premium for Koy's bonds is 0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = 0.1%(t 1), where t = number of years to maturity. What is the default risk premium on Koy's bonds?

a. 5.94%

b. 6.60%

c. 7.26%

d. 7.99%

e. 8.78%

PART B:

Morin Company's bonds sell for $903.04, have a par value of $1,000, and make an annual coupon interest payments of $65. The market requires an interest rate of 8.2% on these bonds. How much longer do these bonds have until maturity?

a. 8

b. 9

c. 10

d. 11

e. 12

PART C:

Buner Corps outstanding bonds, which has a face value of $1,000, have 6 years remaining to maturity. The bonds coupon rate of interest is 8%, and interest is paid semiannually. If investors require a rate of return equal to 12% to invest in similar risk bonds, what should be the market price of Buners bond?

a. 1,000

b. 835.54

c. 832.32

d. 1,167.68

e. none of these

Please show how you got these answers. Thanks so much!