1. How much would you pay for this bond today? Take into consideration your own personal risk preferences, interest rates, inflation, and the probability your company will not be able to pay you back in one year.
2. Based on your answer to the previous question, what would be your discount rate for this bond? Use the present value formulas from the background materials and show your work.
3. Pick two other companies in the same industry as your SLP company. One should be one that you would pay less for a $1000 bond than you would from your SLP company and another one that you would pay more for a $1000 bond from your SLP company. Explain why you would pay more or less for their bonds.
Recently Asked Questions
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