Advantages & Disadvantages of Investments

You need to present to your client, Alice Cartwright, some investment options for her to choose from. Her choices are between the following 2 bonds:

Bond

Description

Face Value

Coupon Rate

Years to Maturity

Bond A

corporate bond in ABA company

$1,000

10% coupon

12 years, paying annual payments

Bond B

corporate bond in ABA company

$1,000

10% coupon

2 years, paying annual payments

For each bond, answer the following questions:

What is the valuation of the bond if the market interest rates are 12%?
What is the valuation of the bond if the market interest rates are 6%?
What is the valuation of the bond if the market interest rates are 2%?
What is the value of the bond at the present time?
What will the bond be worth at maturity?
Are there differences in bond prices? If so, explain why.
400 to 600 words, plus calculations showing all work

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