1. What is the yield to maturity for an 8 percent bond, paying coupon semi-annually that has 15 years until maturity and sells for $975? (5 points) 2. There are regulations that prohibit "insider trading," which is the use of nonpublic information about a security to earn abnormal profits from trading that security. Which form of market efficiency would make these laws unnecessary? Explain why. (5 points) 3. Bayboro Sails is expected to pay dividends of $3.50, $4.00, and $5.00 in the next three yearsD1, D2, and D3, respectively. After three years, the dividend is expected to grow at a constant rate equal to 5 percent per year indefinitely. Stockholders require a return of 15 percent to invest in the common stock of Bayboro Sails. Compute the value of Bayboros common stock today, P0. (7 points) 4. Suppose that an investor is considering the purchase of a bond due to mature in 30 years, carrying an 8 percent coupon rate (coupons are paid semi-annually). This security is available for purchase at a current market price of $975. The bond has a par value of $1000. If this investor redeems the bond 16 years later at a price of $990, what is his holding period yield, h? (5 points) 5. Over the past year you earned a nominal rate of interest of 9 percent on your money. The inflation rate was 2.5 percent over the same period. Find he exact growth rate of your purchasing power. (Hint: Use the Fisher Equation) (5 points)