xation CFIN5 - CHAPTER 6 Integrative Problem Robert Campbell and Carol Morris are senior vice-presidents of the Mutual of Chicago Insurance Company They are co-directors of the company's pension fund management division, with Campbell having responsibility for fixed Income securities (primarily bonds) and Morris being responsible for equity investments. A major new client, the California League of Cities, has requested that Mutual of Chicago present an investment seminar to the mayors of the represented cities. Campbell and Morris, who will make the actual presentation, have asked you to help them by answering the following questions. a. What are the key features of a bond? b. What is the value of a 15-year, $1,000 par value bond with a 10% annual coupon if its required rate of return is 10%? c. (1) What would be the value of the bond described in part (b) it, just after it had been issued, the expected inflation rate rose by three percentage points, causing investors to require a 13% return (2) What would happen to the bond's value if inflation fell, and a declined to 7%? d. What is the yield to maturity on a 10-year, 9% annual coupon, $1,000 par value bond that sells for $887.00