Question
Shannon Corporation has two bonds outstanding. Both bonds have coupon rates of 10% and one has a maturity of 10 years, while the other has
Shannon Corporation has two bonds outstanding. Both bonds have coupon rates of 10% and one has a maturity of 10 years, while the other has a maturity of 20 years. Interest is paid semi-annually. Calculate the following for both bonds. A) If market rates for bonds of equal risk fell to 8% what would be the maximum price an investor would be willing to pay for these bonds? B) If market rates for bonds of equal risk remained at 10%, what would be the bonds' current worth? C) If market rates for bonds of equal risk rose to 12%, what would be the bonds' theoretical value?
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