Bonds and Their Valuation Mini-Case Essay

Sam Strother and Shawna Tibbs atomic number 18 vice-presidents of Mutual of Seattle insurance policy community and co-directors of the companys pension fund management division. A major new client, the northwestern Municipal Alliance, has requested that Mutual of Seattle present an investment funds seminar to the mayors of the represented cities, and Strother and Tibbs, who will go for the actual presentation, remove asked you to help them by answering the following questions. Because the Boeing Company ope pastures in one of the leagues cities, you be to work Boeing into the presentation.a.What are the key features of a stick around?Answer1.Par or face value. We by and large rent a $1,000 par value, but par hind end be anything, and often $5,000 or more is used. With registered hampers, which is what are issued today, if you bought $50,000 worth, that amount would appear on the certificate.2.Coupon rate. The dollar verifier is the rent on the money borrowed, which is generally the par value of the bond. The coupon rate is the annual pursuance payment divided by the par value, and it is generally set at the value of r on the day the bond is issued.3.Maturity. This is the number of years until the bond matures and the issuer must repay the loan (return the par value).4.Issue assure. This is the date the bonds were issued.5.Default risk is inherent in all bonds take away treasury bondswill the issuer have the cash to make the promised payments? Bonds are rated from AAA to D, and the lower the rating the riskier the bond, the higher(prenominal) its default risk premium, and, consequently, the higher its required rate of return.