1.Abner Corporation's bonds mature in

18

years and pay

13

percent interest annually. If you purchase the bonds for

$1,100,

what is your yield to maturity?

2.

A bond of Telink Corporation pays

$100

in annual interest, with a

$1,000

par value. The bonds mature in

15

years. The market's required yield to maturity on a comparable-risk bond is

9

percent.

a.Calculate the value of the bond.

b.How does the value change if the market's required yield to maturity on a comparable-risk bond (i) increases to

12

percent or (ii) decreases to

5

percent?

c.Interpret your findings in parts a and b