Question: Billet Corp. has two bond issues outstanding. Both bonds were issued in the U.S. Issue I: 10 years to maturity, $1000 par, 0% coupon rate.

Billet Corp. has two bond issues outstanding. Both bonds were issued in the U.S. Issue I: 10 years to maturity, $1000 par, 0% coupon rate. Issue II: 10 years to maturity, $1000 par, 10% semi-annual coupon rate. a. Issue I: Calculate the price of the bond at Kd = 9.62% and at 10.75%. Use the bond formula to calculate each price. Issue I Kd=9.62% Issue I Kd=10.75%

b. Issue II: Calculate the price of the bond at Kd = 9.62% and at 10.75% Use your financial calculator and list all of the variables along with their numeric values. (n=10, i=9.62%, etc).

Issue II Kd = 9.62% Issue II Kd=10.75%

c. Describe the relationship you see between the coupon rate and price changes due to interest rates price risk.

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