1. Skywalker Corporation has bonds trading in the secondary market that mature in 15.00 years. Each bond pays an annual coupon of $93.00 with a face value of $1,000. Investors in Trek Star debt currently seek an 9.00% return. Do Skywalker bonds trade a DISCOUNT or a PREMIUM?
2. Investors predict that Cargo Corporation stock will trade for $32.02 in one year. The company will not pay a dividend in the next year. If you desire a return of 15.00% on Cargo stock, how much are you willing to pay for a share today?
3. You manage a $100 million bond portfolio with a duration of 9 years. You wish to hedge this portfolio against interest rate risk using T-bond futures with a contract size of $100,000 and a duration of 12 years. How many contracts are required?