1. Suppose a coupon bond (Face value = $1000) pays $60 in interest annually each year and has three years to maturity. The current yield to maturity is 4%. What is the current price of the bond? 2. For a consol (perpetuity) with a yearly payment of $60, assume its yield to maturity at the beginning of the year is 6% and at the end of the year it is 7%. Calculate: 3. For an 6% coupon bond selling at face value (Face value =$1000) with 2 years to maturity,, assume its yield to maturity at the beginning of the year is 6% and at the end of the year it is 7%. Calculate: a. The bond price at the beginning of the year; b. The bond price at the end of the year; c. the rate of return for the year a. b. 4. 5. For each of following scenarios, using the bond market model, illustrate how each will affect the price and yields on US Corporate Bonds: c. a. The bond price at the beginning of the year; b. The bond price at the end of the year; c. the rate of return for the year Which bond offers the higher rate of return? Why? People expect a bear market in stocks (stock prices are expected to decline) There is a sudden increase in volatility in the corporate bond market. Expected inflation increases. Show Work

1. Suppose a coupon bond (Face value =$1000 ) pays $60 in interest annually each year and has three years to maturity. The current yield to maturity is 4%. What is the current price of the bond? 2. For a consol (perpetuity) with a yearly payment of $60, assume its yield to maturity at the beginning of the year is 6% and at the end of the year it is 7%. Calculate: a. The bond price at the beginning of the year; b. The bond price at the end of the year; c. the rate of return for the year 3. For an 6% coupon bond selling at face value (Face value =$1000 ) with 2 years to maturity, assume its yield to maturity at the beginning of the year is 6% and at the end of the year it is 7%. Calculate: a. The bond price at the beginning of the year; b. The bond price at the end of the year; c. the rate of return for the year 4. Which bond offers the higher rate of return? Why? 5. For each of following scenarios, using the bond market model, illustrate how each will affect the price and yields on US Corporate Bonds: a. People expect a bear market in stocks (stock prices are expected to decline) b. There is a sudden increase in volatility in the corporate bond market. c. Expected inflation increases