The Valuation and Characteristics of Bonds Please answer the following: 1. Distinguish between debentures and mortgage bonds. 8pts 2. a. How does a bond's par value differ from its market value? 4pts b. Explain the differences among a bond's coupon interest rate, current yield, and required rate of return. 4pts 3. What factors determine a bond's rating? Why is the rating important to the firm's manager? 8pts 4. What are the basic differences among book value, liquidation value, market value, and intrinsic value? 8pts 5. What is a coupon rate? How is it used to calculate a rate? 8pts 6. Sonne, Inc. bonds have a 8.75% coupon rate. The interest is paid quarterly, and the bonds mature in 5 years. Their par value is $1,000. a. If your required rate of return is 10%, what is the value of the bond? 10pts b. If your required rate of return is 10% and interest is paid semi-annually, what is the value of the bond? 10pts 7. Holy Donut bonds have an annual coupon rate of 3.65% and a par value of $800 and will mature in 10 years. If you require a return of 8.5 percent, what price would you be willing to pay for the bond? What happens if you pay more for the bond? What happens if you pay less for the bond? 10pts 8. You own a bond that pays $67 in annual interest, with a $1,000 par value. It matures in 12 years and your required rate of return is 7 percent. What is the value of the bond? 10pts 9. Scales Corp plans on issuing bonds that pay no interest but can be converted into $1,000 (you receive when bond matures), 10 years from their purchase. It is determined that they should yield 5.25%, compounded annually. What price should Scales Corp sell the bonds? 10pts 10. P&P is issuing a bond where interest is paid monthly. What is the value of the bond if your required rate of return is 8%, the bonds par value is $1,000, matures in 5 years & there is a coupon rate of 3.75%?10pts Late assignments are subject to penalty (Monday -5, Tuesday -10, Wednesday -15, Thursday or later will receive no credit)