1. Suppose you buy a 7 percent coupon, 20-year bond today when it's first issued. If interest rates suddenly rise to 15 percent, what happens to the value of your bond? Why?

2. Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of 1,000, 25 years to maturity, and a coupon rate of 6.4 percent paid annually. If the yield to maturity is 7.5 percent, what is the current price of the bond?

3. Page Enterprises has bonds on the market making annual payments, with nine years to maturity, and selling for $948. At this price, the bonds yield 5.9 percent. What must the coupon rate be on the bonds?

4. Say you own an asset that had a total return last year of 10.7 percent. If the inflation rate last year was 3.7 percent, what was your real return?