Consider the following indepen

Consider the following independent situations related to bond valuation:

  1. Electrobar Inc. offer bonds with a coupon payment of $55 annually and the market’s required rate of return is 9,4%. The face value of the bond is $550 and the bond matures in 7 years. What is the value of the bond?
  2. The corporation ABC is bringing new bonds on the market. The bonds provide a coupon payment of $65 semi annually. The market’s required rate of return is approximately 11%. The bond matures in 15 years and have a face value of $1,100.
    1. What is the value of the bond?
    2. What is the difference between the bond value and the face value?
  1. Lahey’s bonds have the following characteristics: $1,000 par value, 8% coupon rate, and 12 years to maturity,
    1. How much would you be willing to pay for this bond if your required return is 7%? Is this a discount or a premium price? Explain.
    2. Repeat (a) using a required rate of 10 %.

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