Question: Each Section should be completed in a separate spreadsheet tab and all calculations should be performed using Excel formulas: You financial adviser has presented you

Each Section should be completed in a separate spreadsheet tab and all calculations should be performed using Excel formulas:

You financial adviser has presented you with an opportunity to buy a corporate bond issued by Microsoft. The $1,000 par value bond is rated AAA, so you are not concerned about default risk. The bond was issued 3 years ago but has exactly 7 years remaining until maturity. It has a coupon of 3.5% that pays interest annually at the end of each year. Similar bonds in the market today are trading at an interest rate of 6.5%. Calculate and answer the following questions about the bond.

a) What is the fair market value of the bond today?

b) Based on todays fair market value of the bond, is it trading at a discount or a premium?

c) What is the current yield on the bond (based on todays fair market value)?

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