Chapter 6

# Chapter 6 - Chapter 6 Conceptual Problems 1 The value would...

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Chapter 6 Conceptual Problems 1. The value would be 100/(1+.038)^.75. This comes out to be \$97.24. 2. The face value bond with the higher yield to maturity would be c because the interest rate is higher and it is selling for a larger amount than the other two bonds. Therefore you will earn more money in interest over the year than with the other two bonds. 6. A. The price of the bond would go from around 55 dollars to about 50 dollars. This would be because the inflation rate went up, causing the value of the bond to decrease further. B. The consequences for the price of the bond would be that it would most likely go down. Investor’s will be less likely to buy the bonds because the price of them may go down and they would lose money by buying the bond. The bond will become less attractive to the investors since the payments promised to the bond’s issuer would be of lesser value. 7. What will likely make these bonds successful is the ongoing sale of the music of these artists and if people believe that they are worth buying. If you believe that an artist will

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Chapter 6 - Chapter 6 Conceptual Problems 1 The value would...

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