ACTUAL RETURN -
(a) What actual return did you earn if you bought a bond for $1,000, sold it a year later for $950, and received a $50 annual coupon the day before you sold it? (INCLUDE FORMULAS USED TO SOLVE PROBLEM).
PRICING BONDS AT A PREMIUM -
(b) Calculate the price of a 10 percent coupon (annual coupons), $1,000 face value 20-year bond if the appropriate discount rate is 3 percent. Show your return if you hold this bond for three years and discount rates don't change. (INCLUDE FORMULAS USED TO SOLVE PROBLEM).
PRICING BONDS WITH SEMI-ANNUAL COUPON PAYMENTS -
(c) Calculate the price of a 4 percent coupon (annual coupons), $100 face value, 2-year bond if the coupon is paid semi-annually and the six-month discount rate is 3 percent. Calculate your actual return if you hold this bond for one year and the discount rate does not change. (INCLUDE FORMULAS USED TO SOLVE PROBLEM).