Problem 1. You are called in as a financial analyst to appraise bonds of the Holtz Corporation. The $1,000 par value bonds have a quoted annual interest rate of 14 percent. The yield to maturity on the bonds is 12 percent annual interest. There are 15 years to maturity. Compute the price of the bonds.
Problem 2. A bond with 5 years to maturity and a coupon rate of 6% has a par or face value of $20,000. Interest is paid annually. if you required a return of 8% on this bond
Problem 3. You believe that next year there is a 30% probability of a recession and a 70% probability that the economy will be normal. If your stock will yield 10% in a recession and 20% in a normal year, what is your expected return?