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Finance Four Problems Set

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Question;Problem 8-8 Inflation and Nominal ReturnsThe real rate is 2.8 percent and the inflation rate is 4.4 percent.What rate would you expect to see on a Treasury bill? (Do not round intermediate calculations andround your final answer to 2 decimal places. (e.g., 32.16))Treasury bill rate%Problem 8-28 Valuing BondsThe Morgan Corporation has two different bonds currently outstanding. Bond M has a face value of$30,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $1,900every six months over the subsequent eight years, and finally pays $2,200 every six months over the lastsix years. Bond N also has a face value of $30,000 and a maturity of 20 years, it makes no couponpayments over the life of the bond. The required return on both these bonds is 12 percent compoundedsemiannually.What is the current price of Bond M and Bond N? (Do not round intermediate calculations and roundyour final answers to 2 decimal places. (e.g., 32.16))Current priceBond MBond N$$Problem 8-14 Bond Price MovementsMiller Corporation has a premium bond making semiannual payments. The bond pays a coupon of 11percent, has a YTM of 9 percent, and has 16 years to maturity. The Modigliani Company has a discountbond making semiannual payments. This bond pays a coupon of 9 percent, has a YTM of 11 percent,and also has 17 years to maturity.What is the price of each bond today? (Do not round intermediate calculations and round your finalanswers to 2 decimal places. (e.g., 32.16))Price of Miller Corporation bondPrice of Modigliani Company bond$$If interest rates remain unchanged, what do you expect the price of these bonds to be 1 year from now?In 9 years? In 14 years? In 14 years? In 17 years? (Do not round intermediate calculations andround your final answers to 2 decimal places. (e.g., 32.16))Price of bond1 year9 years14 years14 years17 yearsMiller Corporation Bond$$$$$Modigliani CompanyBond

 

Paper#48280 | Written in 18-Jul-2015

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