1. A government bond currently sells for $1,195 and pays $75 per year in interest for 14 years when it matures. If the call value of this bond is $1,000, what is its yield to maturity if it is purchased today for $1,195?

2. Suppose the government bond described in Problem 1 above is held for five years and then the savings institution that purchases the bond decides to sell it at a price of $940. Can you calculate the average annual return that the savings institution will have earned? for your five-year investment in the bond?

3. .S. Treasury securities are available for purchase this week at the following prices (based on a face value of $100) and with the maturities indicated.

a. $97.25, 182 days.

b. $95.75, 270 days.

c. $98.75, 91 days.

Calculate the bank discount rate (DR) on each invoice if it is held until maturity. What is the equivalent yield to maturity (sometimes called bond equivalent yield or coupon equivalent) on each of these Treasury securities?