13. A. Company Corporation’s bonds mature in 14 years and pay 7% interest annually.
If you purchase the bonds for $1110.00, what is your expected rate of return? (3 Marks)
B. A Company Corporation’s bonds pay $70 in annual interest, with a $1,000.00 par value. The bond matures in 17 years. Your required rate of return is 9%
iCalculate the value of the bond. (3 Marks)
(ii) How does the value change if your required rate of return
(a) increases to 11%
(b) decreases to 6% (4 Marks)
iii. Interpret your findings in part (i) and (ii) (4 Marks)