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 6%, where a. MICROSOFT GE CAPITAL 6% 10 MOGAN STANLEY 7% Annual Coupon Rate 5% Years to Maturity 30 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. Assume you have a bond with an annual coupon rate 7%, a par value of $1,000, and a current market price of $780. What is the current yield of this bond? 2. Bank of America has bonds with a par value of $1,000 and a coupon rate of 8%, which is paid semiannually. It matures in 7 years. Your annual required rate of return is 10% 3, What is your valuation of the bonds? What is the bond's annual expected rate of return (annual YTM) if the market price of this bond is $900? Should you purchase the bond? a. b. At the beginning of 2017, you bought a $1,000 par value corporate bond with a 6% annual coupon rate and a 10-year maturity. The coupon is paid semiannually. When you bought this bond, it had an annual YTM of 5% 4. 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 6%, where a. MICROSOFT GE CAPITAL 6% 10 MOGAN STANLEY 7% Annual Coupon Rate 5% Years to Maturity 30 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. Assume you have a bond with an annual coupon rate 7%, a par value of $1,000, and a current market price of $780. What is the current yield of this bond? 2. Bank of America has bonds with a par value of $1,000 and a coupon rate of 8%, which is paid semiannually. It matures in 7 years. Your annual required rate of return is 10% 3, What is your valuation of the bonds? What is the bond's annual expected rate of return (annual YTM) if the market price of this bond is $900? Should you purchase the bond? a. b. At the beginning of 2017, you bought a $1,000 par value corporate bond with a 6% annual coupon rate and a 10-year maturity. The coupon is paid semiannually. When you bought this bond, it had an annual YTM of 5% 4