Question: 1. (Bond valuation) Hamilton, Inc. bonds have a 6 percent coupon rate. The interest is paid semiannually, and the bonds mature in 8 years. Their par value is $1,000. If your required rate of return is 4 percent, what is the value of the bond? What is the value if the interest is paid annually?
2. (Bond relationship) ITB Plc. has recently issued three alternative coupon bonds with different times to maturity
a. Calculate the market price of each bond, assuming a yield to maturity of 8 percent (face value 5 $1,000).
b. Which bond is more volatile? Why?