Problem 1) Consider a bond with a par value of $1,000. The coupon is paid semi-annually and the market interest rate (effective interest rate) is 10 percent. How much would you pay for the bond if:
a) The coupon rate is 8% and the remaining time to maturity is 20 years?
b) The coupon rate is 12% and the remaining time to maturity is 15 years?
Problem 2) A 20-year maturity 9% coupon bond paying coupons semiannually is callable in 5 years at a call price of $1,060. The bond currently sells at a yield to maturity of 7%. What is the yield to call?