Data table

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Here are data $on$ $$1,000$ par value bonds issued $by$ Microsoft, $GE$ Capital, and Morgan Stanley. Assume you are thinking about buying these bonds. Answer the following questions:

$a.$ Assuming interest $is$ paid annually, calculate the values $of$ the bonds $if$ your required rates $of$ return are $as$ follows: Microsoft, $3\mathrm{.}5$ percent; $GE$ Capital, $9$ percent; and Morgan Stanley, $12$

percent; where:

$b.$ The bonds are selling for the following amounts:

Microsoft $$1,146$

$GE$ Capital $$560$

Morgan Stanley $$718$

What are the expected rates $of$ return for each bond?

$c.$ How would the value $of$ the bonds change $if(1)$ your required rate $of$ return $(r_b)$ increased $2$ percentage points $or(2)$ decreased $2$ percentage points?

$d.$ Explain the implications $of$ your answers $in$ part $cin$ terms $of$ interest rate risk, premium bonds, and discount bonds.

$e.$ Should vou buv the bonds? Exnlain.

$a.If$ your required rate $of$ return $on$ the Microsoft bond $is3\mathrm{.}5$ percent, what $is$ the value $of$ the bond?

$$1075\mathrm{.}84(Roundto$ the nearest cent.$)$

$If$ your required rate $of$ return $on$ the $GE$ Capital bond $is9$ percent, what $is$ the value $of$ the bond?

$(Roundto$ the nearest cent.$)$

$If$ your required rate $of$ return $on$ the Morgan Stanley bond $is12$ percent, what $is$ the value $of$ the bond?

$(Roundto$ the nearest cent.$)$