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1a.The following table summarizes prices of various default-free zero-coupon bonds ($100 face value): Maturity (years) 1 2 3 4 5 Price (per $100 face value)

1a.The following table summarizes prices of various default-free zero-coupon bonds ($100 face value):

Maturity (years)

1

2

3

4

5

Price (per $100 face value)

$96.56

$92.17

$87.66

$82.94

$77.78

a. Compute the yield to maturity for each bond.(Round to two decimal places.) b. Plot the zero-coupon yield curve (for the first five years). c. Is the yield curve upward sloping, downward sloping, or flat? Note:Assume annual compounding.

1b. Suppose that Ally Financial Inc. issued a bond with 10 years until maturity, a face value of $1,000, and a coupon rate of 6% (annual payments). The yield to maturity on this bond when it was issued was 12%. a. What was the price of this bond when it was issued? (Round to the nearest cent.) b. Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment? c. Assuming the yield to maturity remains constant, what is the price of the bond immediately after it makes its first coupon payment?

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