# (SOLVED) Here are data on $1,000 par value bonds issued by Microsoft, GE Capital, and Morgan Stanley.

**Discipline:** Finance

**Type of Paper:** Question-Answer

**Academic Level:** Undergrad. (yrs 1-2)

**Paper Format:** APA

**Pages:**1

**Words:**400

Question

**Mini Case **

**This Mini Case is available in MyFinanceLab. **

**Here are data on
$1,000 par value bonds issued by Microsoft, GE Capital, and Morgan
Stanley. Assume you are thinking about buying these bonds. Answer the
following questions. **

**a. Assuming interest is paid annually, calculate
the values of the bonds if your required rates of return are as follows:
Microsoft, 6 percent; GE Capital, 8 percent; and Morgan Stanley, 10
percent; where **

MICROSOFT | GE CAPITAL | MORGAN STANLEY | |

Coupon interest rate | 5.25% | 4.25% | 4.75% |

Years to maturity | 30 | 10 | 5 |

**b. Assume that the
bonds are selling for the following amounts: Microsoft $1,100 GE Capital
$1,030 Morgan Stanley $1,015 What are the expected rates of return for
each bond? **

**c. How would the value of the bonds change if (1) your
required rate of return (ru) increased 2 percentage points or (2)
decreased 2 percentage points? **

**d. Explain the implications of your
answers in part (b) in terms of interest rate risk, premium bonds, and
discount bonds. **

**e. Should you buy the bonds? Explain. **