2. A Company will issue a zero-coupon bond this coming month. The projected yield for the bond is 6%. The par value of the bond is $1,000. Show all steps, workings, and formula(s) clearly. Round final answer to two decimal places.

i. What is the amount of coupon payment? Briefly comment on your answer. (1.5 marks)

ii. What is the price of the bond using a semi-annual convention if the maturity is 30 years? (1.5 marks)

b) Mid-Growth Company is about to issue a bond with semi-annual coupon payments, a coupon rate of 5.5%, and par value of $1,000. The yield-to-maturity for this bond is 7.5%. Show all steps, workings and formula(s) clearly.

i. What is the price of the bond if the bond matures in five years? (1.5 marks)

ii. What is the price of the bond if the bond matures in twenty years? (1.5 marks)

iii. Based on your calculations in parts (i) and (ii) above, what do you notice about the price of the bond in relationship to the maturity of the bond? (1 mark)

c) An investment banking firm for NewCorp has forecasted the prices for NewCorps new issue of bonds under several different economic conditions as displayed in the following table. What is the expected (average) selling price of the bond? Show all steps, workings, and formula(s) clearly. Round final answer to two decimal places. (2 marks)

	Recession	Steady	Boom
Probability	.35	.55	.10
Bond Price	$970	$1,000	$1,150