2. After recently receiving a bonus, you have decided to add some bonds to your investment portfolio. You have narrowed your choice down to the following bonds (assume semiannual payments)

a. Using the Price function, calculate the intrinsic value of each bond. Are any of the bonds currently undervalued?

b. Calculate the current yield of each bond. Is this the total return that you would earn each year? If you were on a fixed income, would you care about this number?

c. Using the yield function, calculate the yield to maturity of each bond using the current market prices.

d. Calculate the duration. Does duration increase linearly with term?

f. Which bond would you rather own if you expect market rates to fall by 2% for all bonds? What if rates will rise by 2%? Why?3. In early July 2019, the U.S. Treasury issued three T-Bills, and they had issued a one-year T-Bill on June 20, 2019:

**f. Do f. (Hint you want to choose the bond that gives the most % change in price when rates fall and choose the bond that gives the least % fall in price when rates rise.)

\begin{tabular}{|l|r|r|r|} \hline & \multicolumn{1}{|c|}{ Bond A } & \multicolumn{1}{c|}{ Bond B } & \multicolumn{1}{c|}{ Bond C } \\ \hline Settlement Date & 8/15/2020 & 8/15/2020 & 8/15/2020 \\ \hline Maturity Date & 2/15/2031 & 11/15/2040 & 12/15/2050 \\ \hline Coupon Rate & 5.00% & 6.50% & 7.60% \\ \hline Market Price & $975 & $1,062 & $1,103 \\ \hline Face Value & $1,000 & $1,000 & $1,000 \\ \hline Required Return & 5.35% & 5.90% & 7.50% \\ \hline \end{tabular}