After recently receiving a bonus you have decided to add

#3511
After recently receiving a bonus, you have decided to add some bonds to your investment
portfolio. You have narrowed your choice down to the following bonds (assume semiannual
payments): Bond A Bond BSettlement Date........................ 2/15/2012...............
2/15/2012Maturity Date........................... 4/15/2016................. 6/15/2027Coupon
Rate.............................. 3.00%.......................... 7.50%Market
Price................................$890.................... $1,040Face Value.................................
$1,000.................... $1,000Required Return............................. 5.25%.......................... 7.00%a.
Using the PRICE function, calculate the intrinsic value of each bond. Is either bond currently
undervalued? How much accrued interest would you have to pay for each bond?b. Calculate
the current yield of both bonds.c. Using the YIELD function, calculate the yield to maturity of
each bond using the current market prices. How do the YTMs compare to the current yields of
the bonds?d. Calculate the duration and modified duration of each bond.e. Which bond would
you rather own if you expect market rates to fall by 2% across the maturity spectrum? What if
rates will rise by 2%? Why?View Solution:
After recently receiving a bonus you have decided to add

ANSWER
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