1.Assume that ABC Ltd. and XYZ Ltd. have similar $1,000 par value bond issues outstanding. The bonds are equally risky. The XYZ bond has an annual coupon rate of 7 percent and matures 20 years from today. The ABC bond has a coupon rate of 7 percent, with interest paid semiannually, and it also matures in 20 years. If the nominal required rate of return, rd, is11 percent, semiannual basis, for both bonds, what is the difference in current market prices of the two bonds?

2.Consider the following bonds

Bond- Maturity(in Years) Annual Coupon(%) Price

Bond 1 1 10 106.56

Bond 2 2 8 106.20

Bond 3 3 8 106.45

Find 1-year, 2-year, and 3-year zero coupon rates from the above table. You may assume annual compounding.