Bond

Fixed Income Corporation just issued 10-year $1000 bonds with a coupon rate of 5.5% per annum.



[A] If you required a return of 6% per annum and the coupons are paid annually, what would you be willing to pay for one of these bonds?

[B] If you required a return of 6% per annum and the coupons are paid semi-annually, what would you be willing to pay for one of these bonds?

[C] Would you buy Hill Corporation bonds from (b) (Semi-annual coupon) if they were trading at $900? Why?

[D] Briefly explain what is meant by investment risk?