You are given the following information concerning a noncallable sinking fund debenture Principal $1000 Coupon rate of interest 7 % Term to maturity

You are given the following information concerning a noncallable sinking fund debenture

Principal $1000

Coupon rate of interest 7 %

Term to maturity 15 years

Sinking fund 5 percent of outstanding bonds retired annually the balance at maturity

A) If you buy the bond today at its face amount and interest rates rise to 12% after three years have passed what is your capital gain or loss?

B) If you hold the bond 15 years what do you recive at maturity?

C) What is the bond current yield as of right now?

D) Given your price in a, what is the yield of maturity

E) Is there any reason to believe that the bond will be called after three years have elapsed if interest rates decline

F) what proportion of the total debt issue is retired by the sinking fund

G) What assets secure this bond?

h) If the final payment to retire this bond is $1,000,000 how much must the firm invest to accumulate this sum if the firm is able to earn 7% on the invest funds.

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