1. Merton Enterprises has bonds on the market making annual payments, with 18 years to maturity, and selling for $960. At this price, the bonds yield 8.7 percent. What must the coupon rate be on Mertons bonds

2. Crossfade Co. issued 17-year bonds two years ago at a coupon rate of 10.1 percent. The bonds make semiannual payments. If these bonds currently sell for 97 percent of par value, what is the YTM?

3. Locate the Treasury bond in Figure 6.3 maturing February 2026. Assume a $1,000 par value.

3a. Is this a premium or a discount bond?

3b. What is its current yield?

3c. What is its yield to maturity?

3d. What is the bid-ask spread in dollars?

FIGURE 6.3 U.S. Treasury Quotes TREASURY NOTES & BONDS Sample Wall Street Journal U.S. Treasury Treasury note and bond data are representative overthe-counter quotations as of 3 p.m. Eastern note and bond prices time. Asked Maturity Coupon Bid Asked Chg Yield To buy Treasury bonds directly from the government, go to treasurydirect.gov. 1 1/30/2012 12/15/2012 4/15/2014 8/15/2015 5/31/2016 5/15/2017 6/30/2017 10/31/2018 2/15/2020 8/15/2021 11/15/2021 8/15/2022 11/15/2022 2/15/2026 8/15/2027 8/15/2029 5/15/2030 2/15/2031 2/15/2036 2/15/2037 5/15/2037 5/15/2039 8/15/2039 11/152009 2/15/2040 5/15/2040 8/15/2040 1 1/15/2041 3.375 1.125 1.250 10.625 1.750 8.750 2.500 1.750 8.500 8.125 2.000 7.250 7.625 6.000 6.375 6.125 6.250 5.375 4.500 4.750 5.000 4.250 4.500 4.375 4.625 4.375 3.875 3.125 102.7266 100.8672 102.2422 135.8906 104.7656 140.9375 108.1250 102.5781 153.0156 155.1 094 99.9063 149.7188 153.9219 141.3906 148.2344 147.8125 150.7188 138.5781 126.2500 130.8750 135.5156 122.0781 126.8906 124.5156 129.3281 124.6094 114.7813 99.5000 102.7969 100.9063 102.2734 135.9375 104.7969 140.9688 108.1563 102.6250 153.0625 155.1563 99.9531 149.7500 153.9531 141.4375 148.2813 147.8438 150.7500 138.6250 126.2813 130.9219 135.5625 122.1250 126.9375 124.5469 129.3594 124.6406 114.8594 99.5625 .0000 .0234 1172 .2031 4375 .5313 4844 5469 7969 .6719 4844 7188 .7031 .8750 .8750 .9063 .8906 .8281 .5938 .5469 .5469 4219 .5781 .5781 4219 .6719 4531 .0938 0.062 0.102 0.223 0.426 0.629 0.835 0.955 1.342 1.485 1.812 2.005 1.998 2.035 2.488 2.585 2.688 2.713 2.756 2.964 2.988 2.987 3.050 3.048 3.058 3.058 3.066 3.088 3.148