1. Assume that a $1,000 bond with 22 years to maturity has a 5.8% coupon rate and that coupons are paid semiannually. Calculate the price of the bond assuming a 5% current market return using either a financial calculator or the bond pricing formula. What is the current yield and capital gains yield for the bond?

2. For any company of your choosing look up one of their bonds that has at least 10 years to maturity. List the exact maturity date, coupon price, bond rating and yield to maturity. Now assume market yields are 1% above the current yield to maturity. Calculate the price using the Price function in Excel. Make sure to show me all inputs.

3. Now assume you buy the bond in #2 today at the actual quoted market price and then you sell it in 6 years when bond yields are 2% above the current yield to maturity. What will be the price of the bond (using Excel again) and what will be the realized annual yield you earned over the 6-year period? Explain the results. Please show all inputs for both calculations.

4. Calculate the price of a zero coupon $1,000 bond that has 20 years to maturity if current yields are 7.5% and the price is calculated using semi-annual compounding. Now calculate the expected price of the bond in 5 years if interest rates have fallen to 6%. What would your actual rate of return have been if you bought the bond at the original price and sold it 3 years later?