Corporate FinanceMini-CaseMini-caseStudent Name: __________________________________________________________________________________________Ms. Katherine Tibbs is director of the EastMutual’s fixed-income security management division.The HR department of EastMutual has asked Ms. Katherine Tibbs present an investment seminarto new employees of this year. As a financial analyst in the division, you have been asked toprepare answers to the following issues that will be discussed in the investment seminar.=====================================================================[1] What are the meanings of the key characteristics of a bond (e.g., par value, coupon rate, yearto maturity, issue date, and default risk)?=====================================================================[2-a] How is the value of a bond determined? What is the value of a 10-year, $1,000 par valuecorporate bond with a 10 percent annual coupon if its required rate of return is 10 percent?[2-b] What would be the value of the 10-year, $1,000 par value corporate bond with a 10 percentannual coupon (as described in part 2-a), if its required rate of return is 13 percent? Would wenow have a discount or a premium bond?[2-c] What would be the value of the 10-year, $1,000 par value corporate bond with a 10 percentannual coupon (as described in part 2-a), if its required rate of return is 7 percent? Would wenow have a discount or a premium bond?[2-d] What would happen to the value of the 10-year bond over time if the required rate of returnremained at 13 percent, or if it remained at 7 percent?(Hint: with a financial calculator, enter PMT, I/YR, FV, and N, and then change (override) n tosee what happens to the PV as the bond approaches maturity.)(i) Please compute bond prices of these 3 bonds (in 2-a, 2-b, and 2-c) in year 0, year 2, year4, year 6, year 8 and year 10 (maturity date) and provide your answers in thefollowing table;(ii) Please plot the prices on a diagram. In this diagram, the x-axis denotes years (such asyear 0, year 2, year 4, year 6, year 8 and year 10) and y-axis denote bond prices. Corporate FinanceMini-CaseBondPrice =?Year 0BondPrice =?Year 2BondPrice =?Year 4BondPrice =?Year 6BondPrice =?Year 8BondPrice =?Year 10The 10% 10-yearbond with YTM7%The 10% 10-yearbond with YTM10%The 10% 10-yearbond with YTM13%=====================================================================[3-a] What is the yield to maturity on a 10-year, 9 percent annual coupon, $1,000 par value bondthat sells for $887.00? That sells for $1,134.20? What does the fact that a bond sells at a discountor at a premium tells you about the relationship between rd and the bond’s coupon rate?[3-b] What is the current yield for the 10-year, 9 percent annual coupon, $1,000 par value bondthat sells for $887.00? What are the current yield for the 10-year, 9 percent annual coupon,$1,000 par value bond that sells for $1,134.20? (Assume the bond is held to maturity and thecompany does not default on the bond.)=====================================================================[4] How does the equation for valuing a bond change if semiannual payments are made? That is,if a $1000 face-value bond has 10% coupon rate, then this bond pays 2 coupon payments in eachyear and each coupon payment is $50 (= 10%*$1000/2).(i) Find the value of a 10-year, semiannual payment, 10 percent coupon bond if nominal r d =10%.(ii) Find the value of a 10-year, semiannual payment, 10 percent coupon bond if nominal r d =13%.(iii) Find the value of a 10-year, semiannual payment, 10 percent coupon bond if nominal r d =7%.

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