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1. The fifteen-year bond yields 5.0% and has a coupon of 7.0%. If this yield to maturity remains unchanged, what will be its price one year hence? Assume annual coupon payments and a face value of $100. What is the total return to an investor who held the bond over this year?

2. 3 A 25-year U.S. Treasury bond with a face value of $1,000 pays a coupon of 5.50% (2.750% of face value every six months). The reported yield to maturity is 5.2% (a six-month discount rate of 5.2/2 = 2.6%).

3. A government bond matures in 4 years, makes annual coupon payments of 5.9% and offers a yield of 3.9% annually compounded.

   a. Suppose that one year later the bond still yields 3.9%. What return has the bondholder earned over the 12-month period?

   b. Now suppose that the bond yields 2.9% at the end of the year. What return did the bondholder earn in this case?