3. A $10,000 bond carries a 5% coupon. It's 14 years from maturity. If market rates are around 7%, what should it be priced at? (Before you do the calculation, can you guess whether it will sell at a premium, at par, or at a discount?) 4. Your sister is pregnant...it's going to be a boy! (Please tell her "Congratulations!" for me.) Upon hearing the good news, your grandparents sold their old cottage for $70,000, and will use the money to set up a trust for the newborn, who is to be named after me (First name: "Doctor"; Middle name: "Frooman." Seriously, guys, I'm really, truly flattered. Do give your sister my very best.) The trust will legally be set up on the day "Doc" is born. Your grandparents want the trust to pay annually on Doc's first 18 birthdays, to help make sure Doc's family always has a little extra on hand to provide amply for him. If the trust is invested in an asset that is expected to earn 9% per year, how much will it pay your sister annually? 5. You purchase a 6% coupon bond at a premium, paying 10% over its $1000 face value. It has nine years left on it until maturity.... a. What is its current yield? b. If one year from now you sell it for $1130, what will its one-year rate-of-return have been? c. Challenge Question: Approximately what must the market rate have been when you purchased the bond?