Week 2 Case studyMini Case Sam Strother and Shawna Tibbs. (Chapter 5, p,238). Please respond to the following questions, a, b, c, d, e (1); e(2); e(3). Please answer with a never used answer.

1. What are the key factors of a bond?
2. What are call provisions and sinking fund provisions? Do these provisions make bonds or less risky?
3. How does one determine the value of any asset whose value is based on expected future cash flow?
4. How is the value of a bond determined? What is the value of a 10-year, $1,000 per value bond with a 10% annual coupon if its required rate of returns is 10%?
5. (1) What would be the value of the bond described in Part d if, just after it had been issued, the expected inflation rate rose by 3% points, causing investors to require a 13% return? Would we now have a discount or a premium bond?

(2) What would happen to the bonds value if inflation fell and r, declined to 7%? Would we now have a discount or a premium bond?

(3) What would happen to the value of the 10 year bond over time if the required rate of returns remained at 13%? If it remained at 7%? (Hint: With financial calculator, enter PMT, 1/YR,FV and N, and the changed N to see what happens to PV as the bond approaches maturity.)