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    2 Bond Issues Outstanding

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    The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest
    plus $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S 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 percent,
    (2) 8 percent, and (3) 12 percent? 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 (1-year)?

    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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    Solution Summary

    Value of bonds and rate of return for stocks is found in a Word attachment.