1. Chamberlain Co. wants to issue new 11-year bonds for some much-needed expansion projects. The company currently has 10.4 percent coupon bonds on the market at that sell for $1,013.04, make semiannual payments, and mature in 11 years. What coupon rate should the company set on its new bonds if it wants to sell them at par? Assume a par value of $1,000.

2. When Marlyn Monroe died, ex-husband Joe DiMaggio vowed to place fresh flowers on her grave every Sunday for as long as he lived. The week after she died in 1962, a bunch of fresh flowers the the former baseball player thought appropriate for the star cost about $7. Based on the actuarial tables, "Jolton' Joe" could expect to live for 26 years after the actress died. Assume the the EAR is 10.4 percent. Also, assume that the price of the flowers will increase at 4.3 percent per year, when expressed as an EAR. Assuming that each year has exactly 52 weeks, what is the present value of his commitment? Joe began purchasing flowers the week after Marlyn died.

3. McConnell Corporation. has bonds on the market with 15 years maturity, a YTM of 6.6 percent, a par value of $1,000, and a current price of $1,306.50. The bonds make semiannual payments. What must the coupon rate be on these bonds?

4. Say you own an asset that has a total return last year of 17.5%. If the inflation rate last year was 4.5%, what was your real return?