Both Bond Bill and Bond Ted have 6.2 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 5 years to maturity, whereas Bond Ted has 25 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Bill? Of Bond Ted? Both bonds have a par value of $1,000. If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Bill be then? Of Bond Ted? Illustrate your answers by graphing bond prices versus YTM. What does this problem tell you about the interest rate risk of longer-term bonds?

You are chairman of the board of a successful technology firm. there is a nominal federal corporate tax rate of 35 percent, yet the effective tax rate of the typical corporation is about 12.6%. your firm has been clever with use of transfer pricing and keeping money abroad and has barely paid any taxes over the last 5 years; during this same time period, profits were $28 billion. one member of the board feels that it is un-american to use various accounting strategies in order to avoid paying taxes. others feel that these are legal loopholes and corporations have a fiduciary responsibility to minimize taxes. one board member quoted what the ceo of exxon once said: “i’m not a u.s. company and i don’t make decisions based on what’s good for the u.s.” what are the alternatives? what are your recommendations? why do you recommend this course of action?