The Garraty Company - 73476

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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?

 

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(5-9) The Gar

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