1. You purchase a bond with an invoice price of $1,043. The bond has a coupon rate of 6.8 percent, semiannual coupons, and there are five months to the next coupon date.

a) What is the clean price of the bond? --------------------------------------------------------------------------------------------------------------------------------------------------------------

2. Bond P is a premium bond with a coupon rate of 9 percent. Bond D is a discount bond with a coupon rate of 5 percent. Both bonds make annual payments, have a YTM of 7 percent, and have five years to maturity.

a: What is the current yield for bond P? _% b What is the current yield for bond D? _% c. If interest rates remain unchanged, what is the expected capital gains yield over the next year for bond P? d) If interest rates remain unchanged, what is the expected capital gains yield over the next year for bond D?