1. Given the following: default premium = 0.50 % pts.; inflation 3.75%; real rate = 1.25%; maturity premium = 1.15% pts., what would be the nominal rate?
2. Thirteen years ago a firm issued $1,000 par value bonds with a 5% annual coupon rate and a term to maturity of 20 years. Market interest rates have decreased since then and similar bonds today would carry an annual coupon rate of 4%. What would these bonds sell for today if they made (a) annual coupon payments; and (b) semiannual coupon payments?
3. Eight years ago you purchased a $1,000 30-year zero coupon bond for $575. What was the annual YTM on that bond at that time using (a) annual compounding; and (b) semiannual compounding?
4. For the zero-coupon bond in #9 above, if the annual rate on similar bonds is now 7%, what could you sell your bond for today assuming (a) annual compounding; and (b) semiannual compounding?