On October 4^th, 2000, long distance company, EarthCOM, issued bonds to finance a new wireless product. The bonds were issued for 30 years (mature on October 4^th, 2030), with a face value of $1,000, and semi-annual coupons. The coupon rate on these bonds is 8% APR. Over the last 4 years, the company has experienced financial difficulty as the long distance market has grown more competitive.

78.Refer to EarthCOM. The risk associated with EarthCOM bonds has increased dramatically, as investors now want a 15% APR return to hold the bonds. What price should the bonds trade at TODAY (October 4^th, 2004)?

 

79.Refer to EarthCOM. Suppose that today (October 4^th, 2002), EarthCOM admits to fraud in reporting revenues over the last 3 years. The price of EarthCOM immediately tumbles to $500. What is the new yield-to-maturity on EarthCOM bonds? (Express as an APR)

 

What is the calculation process thanks