1. What is an opportunity cost rate? How is this rate used in discounted cash flow analysis, and where is it shown on a time line? Is the opportunity rate a single number that is used to evaluate all potential investments?
2. Calculate the price change for a 1-percent decrease in market yield for the following bond: par = $1000; coupon rate = 6 percent, paid semi-annually; market yield = 6 percent; term to maturity = 10 years