1.

Callable

bond.

Corso Books has just sold a callable bond

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. It is a thirty-year

quarterly

bond with an annual coupon rate

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of

8%

and

$5,000

par value. The issuer, however, can call the bond starting at the end of

6

years. If the yield to call

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on this bond is

5%

and the call requires Corso Books to pay one year of additional interest at the call

(4

coupon payments), what is the bond price if priced with the assumption that the call will be on the first available call date?

What is the bond price if priced with the assumption that the call will be on the first available call date?

$nothing

(Round to the nearest cent.)

2.

Treasury notes and bonds. Use the information in the following table:

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. What is the price in dollars of the February

2005

Treasury note

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with

semiannual

payment if its par value

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is

$100,000?

What is the current yield

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of this note?

What is the price in dollars of the February

2005

Treasury note?

$nothing

(Round to the nearest cent.)

3.

Treasury notes and bonds. Use the information in the following table:

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. Assume a

$100,000

par value. What is the yield to maturity

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of the August

2003

Treasury bond

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with

semiannual

payment? Compare the yield to maturity and the current yield

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. How do you explain this relationship?

What is the yield to maturity of the August

2003

Treasury bond?

nothing%

(Round to three decimal places.)