1. Eighteen years ago a firm issued $1,000 par value bonds with a 6% annual coupon rate and a term to maturity of 30 years. Market interest rates have increased since then and similar bonds today would carry an annual coupon rate of 8%. What would these bonds sell for today if they made annual coupon payments?

2. For the bond in #1 above, if annual rates on similar bonds are now 5%, what could you sell your bond for today assuming annual compounding? What can you conclude about the relationship between bond prices and market interest rates (YTMs)?

3. For the bond in #1 above, if the annual coupon rate was 4% instead of 6%, what could you sell your bond for today assuming annual compounding? What can you conclude about the relationship between bond prices and coupon rates?

4. If the annual coupon bond in #1 above is selling for $1,150 today, according to the approximate YTM formula, what is its annual YTM?