BU 340 BU340 ASSIGNMENT 08 - ASHWORTH
BU340 Managerial Finance I Assignment 08 (Ashworth)
Part A: Moore Company is about to issue a bond with semiannual coupon payments, a coupon rate of 8%, and par value of $1,000. The yield-to-maturity for this bond is 10%.
a. What is the price of the bond if the bond matures in 5, 10, 15, or 20 years?
b. What do you notice about the price of the bond in relationship to the maturity of the bond?
Part C: Use the information in the following table to answer the questions below:
State of Economy
|
Probability of State
|
Return on A in State
|
Return on B in State
|
Return on C in State
|
Boom
|
.35
|
0.040
|
0.210
|
0.300
|
Normal
|
.50
|
0.040
|
0.080
|
0.200
|
Recession
|
.15
|
0.040
|
-0.010
|
-0.260
|
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