1. Interest rate risk is associated with the bonds price variability given a change in the interest rates.

Suppose you have BOND A, which is a 30 year zero coupon bond and BOND B, which is a 5 year 10% coupon bond. If interest rates (YTM) change from 8% to 7% the bonds will increase in value. Suppose BOND A's price changes from $99.38 to 106.91 and the 5 year 10% coupon bond price changes from $1079.85 to $1123.01. Which bond has the greatest percentage increase in value? Record the percentage increase in value of the bond with the highest percentage change below. Write the increase as a decimal, so a 5% increase would be written as 0.0500.

2.What is the total return to an investor who purchases a bond for $1000 and sells the bond for $1,090 next year. Assume the bond has an annual coupon rate of 4% that is paid in two equal payments.

Record your answer as a decimal to four places after the decimal, so if your answer is 4.212111%, record your answer as 0.0421.

3. A 9-year zero coupon bond has a yield to maturity of

6.6 percent, and a par value of $1,000. What is the price of the bond?

4. A 7-year bond has a 8 percent coupon rate with the interest paid in semi annual payments. The yield to maturity of the bond is 2.8 percent, and a face value of $1,000. What is the price of the bond?

5. A 12-year bond has a 9 percent annual coupon, a yield to maturity of 1 percent, and a face value of $1,000. What is the price of the bond?

6.A bond with 10 years to maturity has a face value of $1,000. The bond can be called in four years for $1050. The bond pays an 6 percent semiannual coupon, and the bond has a 1 percent nominal yield to maturity. What is the price of the bond today assuming that it will be called?