Question

Asked Nov 1, 2019

Laurel, Inc., and Hardy Corp. both have 8 percent coupon bonds outstanding, with semiannual interest payments, and both are currently priced at the par value of $1,000. The Laurel, Inc., bond has three years to maturity, whereas the Hardy Corp. bond has 20 years to maturity.

If interest rates suddenly rise by 2 percent, what is the percentage change in the price of each bond? **(Do not round intermediate calculations. A negative answer should be indicated by a minus sign.** **Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)**

Percentage change in price of Laurel, Inc., bond | % |

Percentage change in price of Hardy Corp. bond | % |

If rates were to suddenly fall by 2 percent instead, what would be the percentage change in the price of each bond? **(Do not round intermediate calculations.** **Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)**

Percentage change in price of Laurel, Inc., bond | % |

Percentage change in price of Hardy Corp. bond | % |

Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company has a bond outstanding with a par value of €1,000, 25 years to maturity, and a coupon rate of 7.5 percent paid annually.

If the yield to maturity is 8.6 percent, what is the current price of the bond? **(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)**

Current price €

**(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)**

YTM %

Microhard has issued a bond with the following characteristics:

Par: $1,000

Time to maturity: 5 years

Coupon rate: 8 percent

Semiannual payments

Calculate the price of this bond if the YTM is: **(Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)**

Price of the Bond | |||

a. |
8 percent | $ | |

b. |
10 percent | $ | |

c. |
6 percent | $ | |

Step 1

Hi, as per our policy we will answer only the first three parts of the question. Kindly repost the remaining questions separately in order to be answered.

Step 2

**Computation of percentage change in price of Laurel incorporation bond and Hardy Corporation bond:**

The percentage change is price of Laurel incorporation bond and Hardy Corporation bond when interest increases by 2% is -__5.08% and -17.16%.__

** ****Excel spread sheet:**

Step 3

**Excel workings:**

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