Kebt Corporation's Class Semi bonds have a 12-year maturity and an 8.75% coupon paid semiannually (4.375% each 6 months), and those bonds sell at their $1,000 par value. The firm's Class Ann bonds have the same risk, maturity, nominal interest rate, and par value, but these bonds pay interest annually. Neither bond is callable. At what price should the annual payment bond sell? $937.56 $961.60 $986.25 $1,010.91 $1,036.18

Total$986.2534

Explanation:

We have to discount the annual bond against the same rate but compounding semiannualy

Now we discount the 12 coupon payment and the maturity at the given discount rate

C87.500 (1,000 x 0.0875)

time12

rate0.0894140625

PV$628.4172

Maturity   1,000.00

time   12.00

rate  0.0894140625

PV   357.84

PV c$628.4172

PV m  $357.8362

Total$986.2534

credit history is used by lenders to determine whether you are a 'risky' person to give their money to.

having a short history provide very little data for the lenders. they wouldn't be able to determine your credit behavior from such a small samples. even if they are perfect.

having long credit history with few blemishes provide larger and more accurate data for the lenders to predict your credit behavior.