(Bond valuation) You are examining three bonds with a par value of $1,000 you receive...
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(Bond valuation) You are examining three bonds with a par value of $1,000 you receive $1,000 at maturity) and are concerned with what would happen to their market value if interest rates (or the market discount rate) changed. The three bonds are Bond Aa bond with 4 years left to maturity that has an annual coupon interest rate of 12 percent, but the interest is paid semiannually.Bond Ba bond with 12 years left to maturity that has an annual coupon interest rate of 12 percent, but the interest is paid semiannually.Bond Ca bond with 16 years left to maturity that has an annual coupon interest rate of 12 percent, but the interest is paid semiannually.What would be the value of these bonds if the market discount rate were a. 12 percent per year compounded semiannually? b. 5 percent per year compounded semiannually?c. 17 percent per year compounded semiannually? d. What observations can you make about these results?
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