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Bond J is a 3 percent coupon bond. Bond K is a 9 percent coupon bond. Both bonds have 15 years to maturity, make semiannual payments and have a yield to maturity of 6 percent.
(A) Calculate the prices of Bonds J and Bonds K. Are the bonds priced at a permium, at a discount or at par?
(B) If interest rates suddenely rise by 2%, calculate the prices of the bonds, and the percentage change in price of the two bonds.
(C) If instead the interest rates suddenly dropped by 2 percent, what are the prices of the two bonds and the percentage change in prices. (Dropped relative to the interest rates in part A)
(D) Which of the two bonds has higher interest rate risk?
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Staggert Corp. will pay dividends of $5.00, $6.25, $4.75, and $3.00 in the next four years. Thereafter, management expects the dividend growth rate to be constant at 8.00 percent. If the required rate of return is 20.5 percent, what is the current va..
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The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). What rate of return do you expect to ..
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Analysis of fundamentals: goals, strategy, market, competitive technology, and regulatory and operating characteristics and analysis of fundamentals: revenue outlook.
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