Municipal and corporate bond of equal risk-liquidity

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1. Calculate the present value of a $1,000 zero-coupon bond with 8 years to maturity if the required annual interest rate is 12%.

2. A municipal and a corporate bond of equal risk, liquidity and maturity yield 6% and 10% respectively. For which values of marginal tax rates would you prefer to buy the municipal bond?

3. Calculate the duration of a $1,000, 5% coupon bond with three years to maturity. Assume that all market interest rates is 8% for next three years.

Reference no: EM131825962

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