Microsoft has outstanding bonds of $2,250,000,000 that mature in 20 years. The bonds have a Coupon rate of 2.88% and a Yield to Maturity of 2.84%. The bonds pay interest semi-annually. Answer the following:
1. How much interest is paid to bondholders every 6 months?
2. What is the present value of the bond?
3. Flash forward 5 years, now the bonds have 15 year to maturity. Microsoft is considering issuing new bonds and buying the original bonds back. The market rate of interest is now 3.0%. What is the present value of the bonds now?