Target CORP

Callable: Yes

Corporate Bond

Coupon: 4.00

Maturity: 07/01/2042

Moody's: A2

S&P: A

Price: 130.904

1. For the bond listed above, assume a par value of $1000 and a required rate of return equal to 3.5% per year. Then, answer the questions below.

A. Draw a timeline showing the cash flows for this bond

B. Calculate the bond value based on required rate

C. Calculate the yield-to-maturity based on current market price

2.Answer each of the following questions concerning the bond from #1.

A. Is the bond selling at a premium or a discount? How do you know?

B. Is the bond greater than par, equal to par, or less than par? Why is that the case?

C. Is the bond yield-to-maturity greater than coupon, equal to coupon, or less than coupon? Why is that the case?

D. Given a required rate of return equal to 3.5% per year, would it be wise to invest in this bond? Why?