1. Suppose you are looking at a bond that has a 12% annual coupon (interest is paid annually) and a par (face) value of $1000. There are 3 years to maturity and the yield to maturity is 8%. a. What is the price of this bond?

b. Does the bond sell for a premium or discount? Explain your answer.

2. Consider a bond with four years to maturity that has a 9.25% coupon rate. If the current market interest rate is 10%, how much will the bond price increase if the interest rate falls by 1%?

3. A firm generated net income of $911. The depreciation expense was $47 and dividends were $25. Accounts payables increased by $15, accounts receivables increased by $28, inventory decreased by $14, and net fixed assets decreased by $8. There was no interest expense. What was the net cash flow from operating activity?

4. Reliable Cars has sales of $807,200, total assets of $1,105,100, and a profit margin of 9.68 percent. The firm has a total debt ratio of 64 percent. What is the return on equity?