Question: 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

Here are data on $1,000 par value bonds issued by Microsoft,

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. 1. Assuming coupon interest is paid semiannually, calculate the current market prices of these bonds if investors' annual expected rate of return (annual YTM) is 696, where a. GE CAPITALMOGAN STANLEY 6% 10 MICROSOFT Annual Coupon Rate 5% Years to Maturity 30 7% b. How would the bond prices change if (1) investor's annual expected return increased 2% or (2) decreased 2%? 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. c

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