Question: Set # 3 - Bond Valuation and Interest rates Question # 1 GAMA Corp has issued bonds that have a 10% coupon rate, payable semiannually.

Set # 3 - Bond Valuation and Interest rates Question # 1 GAMA Corp has issued bonds that have a 10% coupon rate, payable semiannually. The bonds mature in 8 years, have a face value of $1,000 and a yield to maturity of 8.5% . What is the price of the bonds? Question # 2 Renfro Corporation's bonds will mature in 10 years. The bonds have a face value of $1,000 and an 8% coupon rate, paid semiannually. The price of the bonds is $1,100. What is the bond's yield to maturity, current yield and capital gains yield? Question # 3 The FAMA Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1000 face value at maturity. Bond L has a maturity of 15 years, and Bond S has a maturity of 1-year. What will be the value of each of these bonds when the going rate of interest (yield to maturity) is: A) 8% B) 12% Why does the longer-term (15-year) bond fluctuate more when interest rates change than does the shorter-term bond (1-year)

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