EXPECTED RETURN ON T-BILLS -
(a) What is the actual expected return on a US government 12-month, T-bill that is priced at $990, assuming its face value is $1,000? (INCLUDE FORMULAS USED TO SOLVE PROBLEM).
PRICING BONDS AT A DISCOUNT -
(b) Calculate the price of a 5 percent coupon (annual coupons), $1,000 face value, 5-year bond if the appropriate discount rate is 3 percent. Show your return if you hold this bond for two years and its discount rate doesn't change. (INCLUDE FORMULAS USED TO SOLVE PROBLEM).
ACTUAL RETURN -
(c) What actual return did you earn if you bought a bond for $1,000, sold it a year later for $1,010, and received a $30 annual coupon the day before you sold it? (INCLUDE FORMULAS USED TO SOLVE PROBLEM).