1. Suppose the market interest rate went down from 10% to 5%, the number of years to maturity is 15, and the annual coupon rate is 10%, what is the intrinsic price of the straight bond?

a. $1,100

b. $818

c. $1,000

d. $1,519

2. Suppose you were offered a 14-year, 10% annual coupon, $1,000 par value bond at a price of $1,494.93. What market rate of interest would you earn on your investment if you bought the bond, held it to maturity, and received the promised interest payments and maturity value?

a. 6.3%

b. 5.0%

c. 10.0%

d. 8.5%

3. Suppose Allied Company's bonds had a deferred call provision that permitted the company to call them 10 years after their issue date at a price of $1,100. Suppose further that the market interest rate had fallen and that the 1 year after issuance, the going market interest rate had declined, causing their price to rise to $1,494.93. What is the yield to call?

a. 4.21%

b. 9.6%

c. 7.5%

d. 10.0%