Question

need help with question 5 and 6 please.

Question 5 (2 points) Again, Inc, bonds have a par value of $1,000, a 32 year maturity, and an annual coupon rate of 12.0% with annual coupon payments. The bonds are currently selling for $862. The bonds may be called in 6 years for 112.0% of par. What quoted annual rate of return do you expect to earn if you buy the bonds and company calls them when possible? 14.24% 13.96% 18.86% 17.16% 11.67% Question 6 (2 points) Within Year, Inc. has bonds outstanding with a $1,000 par value and a maturity of 28 years. The bonds have an annual coupon rate of 12.0% with quarterly coupon payments. You would expect a quoted annual return of 13.0% if you purchased these bonds. What are the bonds worth to you?

Answer 1

Questio 5:

=RATE(6,12%*1000,-862,1120)

=17.16%

Question 6:

=PV(13%/4,28*4,12%/4*1000,1000)

=925.22