[1] A 7%, five-year bond is callable in two years at a call price of $2,000. The bond is currently priced in the market at $1,770. Assuming that the call value and the maturity value are the same, what is the issue's current yield?

[2] Tsuyoshi is considering three Japanese government bonds with different maturities. Which of the following bonds would offer the highest current yield at a par amount of 1,000?

1. A 1%, 20-year bond quoted at 101.5
2. A 0.5%, four-year bond quoted at 102.4
3. A 0%, 30-year bond quoted at 99.8

[3] Daniele wants to calculate the price of an Italian government bond. It has a 1,000 par value with a 1% coupon rate (with interest paid semi-annually) that matures in five years. If the bond is priced to provide a required return of 2.5%, what is the bond's current price?

[4] Tsuyoshi is considering two Japanese government bonds, both with a 10-year maturity. One with a 0.5% coupon and a 2% yield, and the other with a 0.2% coupon and a 1.5% yield. Which of these has the higher price?

[5] In the coming year, the Sandbergs expect a potential rental property investment costing $120 000 to have gross potential rental income of $20 000, vacancy and collection losses equalling 5% of gross income, and operating expenses of $10 000. The mortgage on the property is expected to require annual payments of $8500. The interest portion of the mortgage payments and the depreciation are given below for each of the next three years. The Sandbergs are in the 25% marginal tax bracket.

Year Interest Depreciation

1 $8300 $4500

2 8200 4500

3 8100 4500

The net operating income is expected to increase by 6% each year beyond the first year.

a. Calculate the net operating income (NOI) for each of the next three years.

b. Calculate the after-tax cash flow (ATCF) for each of the next three years.