Two 25-year maturity mortgage-backed bonds are issued. The first bond has a par value of $10,000...

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Two 25-year maturity mortgage-backed bonds are issued. The first bond has a par value of $10,000 and promises to pay a 7.0 percent annual coupon, while the second is a zero coupon bond that promises to pay $10,000 (par) after 25 years, with interest accruing at 6.5 percent. At issue, bond market investors require a 8.5 percent interest rate on both bonds. Required: a. What is the initial price on each bond? b. Now assume that both bonds promise interest at 7 percent, compounded semiannually. What will be the initial price for each bond? c. If market interest rates fall to 6 percent at the end of the fifth year, what will be the value of each bond, assuming annual payments as in (a) (state both as a percentage of par value and actual dollar value)? > Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required C If market interest rates fall to 6 percent at the end of the fifth year, what will be the value of each bond, assuming annual payments as in (a) (state both as a percentage of par value and actual dollar value)? Note: Do not round intermediate calculations. Enter final your answers as a percent rounded to 2 decimal places. Value of bond in dollars $ Value of the bond in % of par Bond 1 11,146.93 32.00 % $ Bond 2 1,247.95 x 75.00% < Required B Required C > Two 25-year maturity mortgage-backed bonds are issued. The first bond has a par value of $10,000 and promises to pay a 7.0 percent annual coupon, while the second is a zero coupon bond that promises to pay $10,000 (par) after 25 years, with interest accruing at 6.5 percent. At issue, bond market investors require a 8.5 percent interest rate on both bonds. Required: a. What is the initial price on each bond? b. Now assume that both bonds promise interest at 7 percent, compounded semiannually. What will be the initial price for each bond? c. If market interest rates fall to 6 percent at the end of the fifth year, what will be the value of each bond, assuming annual payments as in (a) (state both as a percentage of par value and actual dollar value)? > Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required C If market interest rates fall to 6 percent at the end of the fifth year, what will be the value of each bond, assuming annual payments as in (a) (state both as a percentage of par value and actual dollar value)? Note: Do not round intermediate calculations. Enter final your answers as a percent rounded to 2 decimal places. Value of bond in dollars $ Value of the bond in % of par Bond 1 11,146.93 32.00 % $ Bond 2 1,247.95 x 75.00% < Required B Required C >