Question: Question 2: a. Consider a five-year bond issue by Financial Institution POSEIDON of Oakland California. The Face value of the bond is $1,000 dollars, the

Question 2:

a. Consider a five-year bond issue by Financial Institution POSEIDON of Oakland California. The Face value of the bond is $1,000 dollars, the coupon rate of the bond is 12% and the ongoing market interest rate is 10%. Calculate the value of the bond, the Current Yield, the Yield to Maturity and the Capital Gains Yield respectively.

b. Economic conditions change in the country and the ongoing rate of interest increases to 14%. Calculate the value of the bond.

c. A new President is elected, and the discount rate drops to 12%. Calculate the new value of the bond.

d. Comment analytically as to what kind of Bonds exist in the Market?

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