1. Consider a zero-coupon bond with a yield to maturity (YTM) of 3.5%, a face value of $1000, and a maturity date 7 years from today. Trace bond value, current yield, and capital gains yield for each year of the bond.
2. An 8%, annual coupon, $1000 par value, five-year bond yield 6%. If yields remain unchanged, what will be its price in one year?
3. A 9%, 16-year annual pay bond has a yield to maturity of 11% and Macaulay duration of 9.25 years. If the market yield changes by 32 basis points, how much change will there be in the bond’s price? Note that 32 basis points is 32% or 32/100.