1. Allied Corporation has just issued ten thousand $1,000 bonds, maturing in 2048, to establish a research and development fund for a new product. The goal is to develop and launch this new product by late 2020. The offering interest rate was 4.50% for the bonds. Identity the following values for each bond:

Face amount __________ Yield _____ Coupon payment _____ Amount paid _____ semiannually Periods to maturity _____ Present value __________ Yield to maturity _____

2. Using the Allied Corporation bond information from above, calculate the following: a. If the current market interest rate for new investors increases to 6.00%, what will be the present value for this bond? Show your work or your inputs. b. If the current bond market rates drop to 4.00%, what will be the present value for the Allied bond? Show your work or your inputs. c. What conclusion can you draw from this comparison? ____________________________________________________________________________________

3. Determine without the use of a calculator if the following bonds are trading at a premium, at a discount, or at face value: a. A 5% bond maturing in 2015 when current interest rates are 6%: _______________ b. A 4% bond paying monthly until 2042 when current interest rates are 2%: _______________ d. What general observation can you make about this? ________________________________________________________________________________

4. Calculate the answers for following questions. Show your work or your inputs. a. An IBM bond is selling today for $1,251.48 with a face amount of $1,000. There are 11 years until maturity and it has a coupon payment of $40 paid semiannually. What is the yield to maturity b. A Google bond with a face amount of $1,000 is paying a coupon payment of $100 semiannually. The yield to maturity is 4.75% and there are 15 years remaining for this bond. What is the current offering price? c. A Treasury bill has a current price of $1200 and face amount of $1,000. If there are 10 years remaining for this bond and the yield to maturity is 8%, what is the annual coupon payment? d. Nike has a bond that is selling today for $795 with a face amount of $1,000. There are 30 years until maturity and it has a coupon payment of $15, paid annually. What is the yield to maturity? e. A Pfizer bond with a face amount of $1,000 is paying a coupon payment of $70 semiannually. The yield to maturity is 4.78% and there are 20 years remaining for this bond. What is the current offering price? f. General Motors has a current price of $975 and face amount of $1,000. If there are 3 years remaining for this bond and the yield to maturity is 6.75%, what is the annual coupon payment?