1. Unsaved Suppose the yield curve shows 1 year rates at 1%, 2 year rates at 5% and 3 year rates at 10%. What is the price of a bond with a $1000 par value, maturity 3 years, and annual coupon payment of $50? Show all work for credit.
2. Assume that you are considering the purchase of a 20-year, noncallable bond with an annual coupon rate of 5%. The bond has a face value of $1,000, and it makes semiannual interest payments. If you require an 3% yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond? Show all work for credit (either calculator or excel inputs (define variables i.e. Cell A1=1/1/2010) and function(s)).