Given the following data on bonds from AT&T, Dell, and IBM. Each bond has a par value of $1000.

AT&T Dell IBM

Frequency Semiannual Semiannual Semiannual

1. Calculate the value of the bond if your required return is 5.55 percent on AT&T, 5.4 percent on Dell, and 7 percent on IBM.

2. Determine the yield to maturity (YTM) on the bonds given the following prices.

AT&T Dell IBM Price $1,060.00 $1,016.57 $1,307.78

use the yield function to calculate the YTM

3. Based on each bond’s ratings and your determination of its yield to maturity explain how you rank each bond for risk and return.

4. Assume you had $10,000 to invest. How many of each bond would you have? What dollar

amount of interest would each bond return on the investment for the next year? What would your percentage return be for the year, that is, your interest payments divided by the total amount invested?