1. The real risk free rate of return is currently 1.5%.Inflation is expected to be 2% the next two years and 3% the following year.If the Maturity Risk Premium is .5% what is the yield on a 3 year treasury security?(be sure to show your calculation)

2. Delta Corporation bond pays an annual coupon rate of 7% with 4 years remaining until maturity. The par value of the bond is $1,000. Determine the current market value of the bond if the yield to maturity is 8%. (Be sure to indicate your inputs to the financial calculator)

N I/YR PV PMT FV

Current Market Value=

Is Bond Selling at a Premium or Discount?

3. Black Jack Corporation has a bond issue outstanding with a 7% coupon with semi-annual payments, and 4 years remaining until maturity. If the bond has a par value of $1,000 and a yield to maturity of 4.5% what is the current market value of this bond? (Be sure to indicate your inputs to the financial calculator)

N I/YR PV PMT FV

Current Market Value=

Is Bond Selling at a Premium or Discount

4. A bond is available for purchase at a current market price of $863.73. The coupon rate is 8% payable annually; the yield to maturity is 10%. If the par value is $1,000, how many interest payments remain until maturity? (Be sure to indicate your inputs to the financial calculator)

N I/YR PV PMT FV

# of Interest Payments Remaining=

5. Your broker has callable bonds available for sale.These bonds may be called in five years at a price of $1,060. The coupon rate is 6.5% and interest is paid annually. The bond currently sells for $1,090.What is its yield to call?

N I/YR PV PMT FV

Yield to Call=