1.

Assume you buy a bond with the following features Bond maturity = 4 Coupon Rate = 5% Face Value = $1,000 Annual Coupons When you buy the bond the market interest rate = 4.50% Immediately after you buy the bond the interest rate changes to 6.71% What is the "reinvestment" effect in year 3 ?

2.

Bond E has the following features:

Face value = $1,000, Coupon Rate = 10%,

Maturity = 5 years, Yearly coupons

The market interest rate is 3.03%

If interest rate remains at 3.03% for the life of the bond (i.e., 3.03 years), what is the price of Bond E in year 1?

3.

How much would you pay today for a bond that has a face value of $1,000, and annual coupon of $99 and a maturity of 8 years? (=what is the price of the bond?)

The annual interest rate is 4.08%?