1. What is the Yield to Maturity (YTM) of a bond which can be bought today for $10,131.25? The bond has a face value of $10,000. It pays 9.50% coupons semi-annually and it will mature in exactly 7 years.

HINT:First, compute the YTM by multiplying the periodic rate by the coupon frequency. Second, convert this rate to an effective annual rate.

2. The BIG Corporation issued 12-year bonds on 10 Feb 2010. Each of these bonds has a face value of $10,000 and they are currently trading at a yield of 11.50% per annum. The bonds pay quarterly coupons at an annual rate of 7.75% per annum.

(a) Compute the price of each bond of the BIG Corporation on the settlement date (07-Feb-2015). This is the "clean price", excluding any accrued interest. Please use Actual/Actual as the interest rate basis.

(b) Use Goal Seek to find the YTM that would justify a price of exactly $9,000 for each of these bonds. Outline the steps you have used to obtain the answer.

3. A bond with a face value of $100,000 and coupon interest paid semi-annually at an annual rate of 7.50% per annum was issued on 8 May 2013 for 4 years. Similar bonds are now selling at a yield-to-maturity of 7.41% per annum. Based on the most recent and next coupon dates, work out the accrued interest on the settlement date (20-Jan-2015). Please use Actual/Actual as the interest rate basis and leave the Calc_method as its default.