1. What is the price of a bond that has a twelve year maturity, a coupon rate of 4.56 percent, a par value of $1,000, and pays interest semiannually? The current market yield is 5.67 percent. If the company wants to raise $100,000,000, how many bonds must be issued?

2. What annual yield would be necessary for an investor to make a 10 percent profit on the price of the bond in question 3 in one year?

3. How much would James gain or lose if he purchased a 30-year zero-coupon bond with a $1,000 par value and 9% yield to maturity, only to see market interest rates increase to 12% one year later? (Hint: How much would the price change from a year earlier?)

4. A Johnson bond has a par value of $1,000, a yield of 5.71 percent, and a coupon of 4.71 percent, paid semiannually and sells for $825.50. What is the unusual feature of the bond? Hint: solve for the missing variable.

5. The market price of an Smith bond is $956.78, it has 9 years to maturity, a par value of $1,000, and pays an annual coupon rate of 2.58% in semiannual installments. What is the yield to maturity?

6. If the coupon increases to 3.58% for the Smith bond, what is the effect on the yield? Why?

7. Rick the CFO forecasts that market yields will decrease. What is the effect on bond prices? What is the effect on the number of bonds that have to be issued to raise $500 million?