1) Assume that the Treasury sold a $100,000, 30 year bond exactly twenty two years ago.That bond carried a coupon rate of 10.5%.Also assume that today Treasury security maturing in the five to ten year period yield 2.0%.How much would that 22 year old bond sell for today?(Note:for simplicity purposes only, assume annual interest payments on the bondthough Treasury bonds actually pay interest semi-annuallyand assume also that the next interest payment date is exactly one year from now.)

2) Assume that you have the opportunity to buy a 30 year, zero coupon, $60,000 bond.You determine that the yield on a comparable bond (comparable in terms of risk, liquidity, etc.) is 4.0%.How much should you pay (maximum) for the bond?Assume an efficient market.