1. Sea Masters Co. issued $1000 par value bonds with a 9 percent coupon. The bond pays interest semi-annually and has 6 years remaining to its maturity date. If the market demands 7.7 percent required rate on the bond, what is the price of the bond? Round it two decimal places.
2. Suppose you have just bought a 10-year, 6% semiannual coupon bond with $1,000 par value. Your purchasing price of the bond implies that the current YTM is 7%. Select all that are true.
a) your purchasing price would have been lower than the par value
b) you would earn 6% rate of return if you hold this bond until the maturity
c) you will receive a $30 coupon payment every six months
d) the coupon rate will gradually increase until it becomes the same as the YTM
e) the cash flows associated with the bond are an ordinary annuity for the annual 10 year period with $1,000 lump sum at the maturity.