Problem 1. What are the key features of a bond?
Problem 2. What are call provisions and sinking fund provisions? Do these provisions make bonds more or less risky?
Problem 3. How is the value of any asset whose value is based on expected future cash flows determined?
Problem 4. What is the yield to maturity on a 10-year, 9% annual coupon, $1,000 par value bond that sells for $887.00? That sells for $1,234.20? What does the fact that a bond sells at a discount or at a premium tell you about the relationship between rd and the bond's coupon rate?
Problem 5. What is reinvestment rate risk? Which has more reinvestment rate risk, a 1-year bond or a 10-year bond?