1. Consider two bonds, a 3-year bond paying an annual coupon of 5% and a 10-year bond also with an annual coupon of 5%. Both currently sell at a face value of $1,000. Now suppose interest rates rise to 8%. b. What is the new price of the 10-year bonds?
2. What impact does the use of Debt to finance a business have on that company’s Weighted Average Cost of Capital and why?
3. You purchase a bond with an invoice price of $1,178. The bond has a coupon rate of 6.25 percent, a face value of $1,000, and there are two months to the next semiannual coupon date. What is the clean price of this bond?