Use semiannual compounding on all bond problems unless otherwise indicated.
Problem 1. Determine the price of a $1,000 6% coupon rate bond that pays interest semiannually and has 5 years before maturity when similar securities have yields of 5%.
Problem 2. How much money will you be willing to pay for a 3 year $1,000 4% coupon bond that pays interest semiannually when similar securities have yields of 6%?
Problem 3. What is the current yield of the bond in above?
Problem 4. Would you pay 970 for a $1,000 deep discount bond that has 7 years remaining before maturity when similar securities had yields of 6%? Use semiannual compounding of interest rates. Use a coupon rate of 5%
Problem 5. What is the yield to maturity on a $1,000 5% coupon bond that pays interest semiannually, has 3 years before maturity and is currently trading at 96?
Problem 6. What is the coupon yield on the bond in above? What is the current yield on the bond in above?
Problem 7. If the yield to maturity on a bond decreases, will the price of the bond change? If yes, how will the price of a bond change.
Problem 8. List at least three factors that can cause interest rates to change.