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 coupon interest is paid semiannually, calculate the current market prices

of these bonds if investors annual expected rate of return (annual YTM) is 6%,

where

	MICROSOFT	GE CAPITAL	MOGAN STANLEY
Annual Coupon Rate	5%	6%	7%
Years to Maturity	30	10	5

b. How would the bond prices change if (1) investors annual expected return increased

2% or (2) decreased 2%?

c. Explain the implications of your answers in part (a) as they relate to premium bonds

and discount bonds. Explain the implications of your answers in part(b) in terms

interest rate risk.