1.) A $1,000 bond has a 5.5 percent coupon and matures after nine years. If current interest rates are 8 percent, what should be the price of the bond? Assume that the bond pays interest annually.

If after five years interest rates are still 8 percent, what should be the price of the bond?

Change the interest rate in a and b to 3 percent and rework your answers

Price of the bond (nine years to maturity): $

Price of the bond (four years to maturity): $

2.) Big Oil, Inc. has a preferred stock outstanding that pays a $9 annual dividend. If investors required rate of return is 10 percent, what is the market value of the shares?

If the required return declines to 5 percent, what is the change in the price of the stock?