1. Leo Motor's bonds have ten remaining years to maturity. Interest in paid annually, the bonds have $1,000 par value, the coupon rate is 8%. The bonds have a yield to maturity of 9%. What is the current market price of these bonds.
2. Suppose Yahoo sold an issue of bonds with a 10-year maturity, a $1,000 par value, a 10% coupon rate and semi-annual interest payments. Two years after the bonds were issued the going rate of interest in bonds such as these fell to 6%. At what puce would the bonds sell?
3. The values of outstanding bonds changes whenever the going rate of interest changes. In general short-term interest rates are more volatile than long-term interest rates. Therefore, short-term bond prices are more sensitive to interest rates changes than long-term bond prices. Is this statement true or false? Explain