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 ATTACHMENT PREVIEW Download attachmentChapter 6: 1616. Interest Rate Risk. Both Bond Bill and Bond Ted have 7 percent coupons, make semiannualpayments, and are priced at par value. Bond Bill has 3 years to maturity, whereas Bond Ted has20 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage changein the price of Bond Bill? Of Bond Ted? If rates were to suddenly fall by 2 percent instead, whatwould the percentage change in the price of Bond Bill be then? Of Bond Ted? Illustrate youranswers by graphing bond prices versus YTM. What does this problem tell you about the interestrate risk of longer-term bonds?Chapter 7: 11 and 1211. Valuing Preferred Stock. E-Eyes.com has a new issue of preferred stock it calls 20/20preferred. The stock will pay a $20 dividend per year, but the Frst dividend will not be paid un±l20 years from today. If you require a return of 8 percent on this stock, how much should you paytoday?12. Stock Valua±on. Alexander Corp. will pay a dividend of $2.72 next year. The company hasstated that it will maintain a constant growth rate of 4.5 percent a year forever. If you want areturn of 12 percent, how much will you pay for the stock? What if you want a return of 8percent? What does this tell you about the rela±onship between the required return and thestock price?

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