1. What is the annual yield of a 6-year, 6.4% semi-annual coupon-paying bond priced today at $1,190? Par is $1,000.

2. What is the annual yield of a 9-year, 4.1% annual coupon-paying bond priced today at $1,088? Par is $1,000.

3. Show the cash flows and prices for the following four bonds, each with a par value of $1,000 and paying interest semi-annually:

#

Coupon   Rate

Years   to Maturity

Market   Yield

A

6.4%

8

4.5

B

3.7%

9

4.4

C

3.8%

9

4.6

D

0.0%

5

4.3

Which of the four bonds would you prefer to hold and why? (Answer in the box provided.)

4. Considerasemi-annualbondwithanannualcoupon=6.33%,maturity=10 years, par value = $1,000, and a market price today = $1,063:

a. Whatisitsyieldtomaturity(YTM)?

b. Supposethebondcanbecalledat$950attheendofyear8,whatis

itsyield to call?

5. You have two bonds with the following characteristics:

Characteristics 

Bond   A

Bond   B

Coupon 

4.4%

5.5%

Years   to Maturity

7.5

5

Par   Value

$1000

$1000

Price

$902.00

$911.00

a. Whatarethebonddurations?

b. Ifratesriseto4.5%,whatarethenewpricesforeachbond?