12-1: Jerry and his wife just purchased the U.S. Treasury bond, and they have annual income $300,950. The bond will pay a lump sum of $1,000 exactly 4 years from today. The nominal interest rate is 6%. If the coupon rate is 8%, and compounded semiannually, answer the following questions:

1. How much should they pay for the bond price?
2. As an alternative, someone suggests to buy a State of North Carolina bond with exactly the same term, which one should they choose, Treasury bond or Sate bond? Why?
3. If the nominal rate goes up, how does that affect the bond price?