The Garraty Co. has two bond issues outstanding. Both bonds pay $100 annual interest plus $1000 at maturity. Bond L has a maturity of 15 years, and Bond S has a maturity of 1 year.
a. What will be the value of each of these bonds when the going rate of interest is 1. 5%, 8% and 12%. Assume that there is only one more interest payment to be made on bond S.
b. Why does the longer-term (15-year) bond fluctuate more when interest rates change than does the shorter-term bond (1year).
8-4. Fee Founders has preferred stock outstanding that pays a dividend of $5 at the end of each year.The preferred stock sells for $60 a share. What is the preferred stock's required rate of return?
(5-9) The Gar