How much does the price of each bond change

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1. Two bonds both have a face value of $1200 and a coupon rate of 7.25%. The first one matures in six years and the second bond matures in 12 years. If the market rate drops to 6.7% comp. semiannually, how much does the price of each bond change? Which one is worth more?

2. Three $25 000, 6% bonds with semi-annual coupons redeemable at par were bought eight years before maturity to yield 7% compounded semi-annually. Determine the gain or loss if the bonds are sold at 89.625 four years later.

3. A University needs to set aside 1.4 million dollars in two years for new science lab equipment. They decide to start a sinking fund with an interest rate of 5.1% comp. semiannually to help them reach their goal, How much will be their semi-annual payment at the beginning of the payment frequency?

4. A $100 000 bond bearing interest at 8% payable semi-annually is bought five years before maturity to yield 6% compounded annually. If the bond is redeemable at par, what is the purchase price?

Reference no: EM131905583

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