QUESTION 5:

A $1,000 par value bond was issued 25 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Interest rates on similar obligations are now 10 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,050. Further assume Ms. Bright paid 30 percent of the purchase price in cash and borrowed the rest (known as buying on margin). She used the interest payments from the bond to cover the interest costs on the loan.

a. What is the current price of the bond? Use Table 16-2. (Input your answer to 2 decimal places.)

b. What is her dollar profit based on the bonds current price? (Do not round intermediate calculations and round your answer to 2 decimal places.)

c. How much of the purchase price of $1,050 did Ms. Bright pay in cash? (Do not round intermediate calculations and round your answer to 2 decimal places.)

d. What is Ms. Brights percentage return on her cash investment? Divide the answer to part b by the answer to part c. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

QUESTION 3:

The yield to maturity for 10-year bonds is as follows for four different bond rating categories. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.

Aaa	8.40%
Aa1	8.60%
Aa2	11.00%
Aa3	12.00%

The bonds of Falter Corporation were rated as Aaa and issued at par a few weeks ago. The bonds have just been downgraded to Aa2. Determine the new price of the bonds, assuming a 10-year maturity and semiannual interest payments. (Do not round intermediate calculations and round your answer to 2 decimal places.)

PRICE OF BONDS: $________

I WILL RATE! THANKS