November 16th, 2022
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.
What will be the value of each of theses 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.