Bond prices depend on the market rate of interest stated rat

Bond prices depend on the market rate of interest, stated rate of interest, and time. Read the requirements Requirement 1, Compute the price of the following 8% bonds of United Telecom. a. The price of the $400,000 bond issued at 75.25 is $ b. The price of the $400,000 bond issued at 104.25 is S c. The price of the $400,000 bond issued at 95.50 is $ c. The price of the $400,000 bond issued at 102.50 is S Requirement 2. Which bond will United Telecom have to pay the most to retire at maturity? Explain your answer. 6 Requirements 1, compute the price of the following 8% bonds of United Telecom. a. S400,000 issued at 75.25 b. $400,000 issued at 104.25 c. $400,000 issued at 95.50 d. $400,000 issued at 102.50 Which bond will United Telecom have to pay the most to retire at maturity? Explain your answer [-] 2. Print Done Bond a. because it was issued at the lowest price. Bond b. because it was issued at the highest price Bond c. because it was issued at a discount Bond d. because it was issued at a premium United Telecom will pay $400,000 at maturity for all four of the bonds. The bonds all have the same maturity value.

Solution

Requirement 1

Face Value × Issue Price = Market Price

a. $400000 × 0.7525 = $301000

b. $400000 × 1.0425 = $417000

c. $400000 × 0.9550 = $382000

d. $400000 × 1.0250 = $410000

Requirement 2

United Telecom will pay $400000 at maturity for all four of the bonds. The bonds all have the same maturity value.