1. Assume that you are interested in a 4.50 percent coupon corporate bond that has fifteen years left to maturity. The market interest rate is 6.75 percent. If coupon payments are semiannual, what should the price of this bond be? Is this a discount bond or premium bond, and why?
2. Assume that you are interested in a 5.50 percent coupon corporate bond that has twenty-five years left to maturity, but can be called back in ten years for a premium of one year’s worth of interest payments. If coupon payments are semiannual, and the bond is currently selling for $1,050, what is the yield you could expect on this bond if you held it until it can be called?