3) A 5-year corporate bond has a 6% annual coupon rate with semi-annual coupons and a face value of $1000. The bond is currently trading at a yield-to-maturity (YTM) of 3% (APR with semi-annual compounding).

a. What are the cash flows of this bond? note the semi-annual coupons.

b. Show that today's price of this bond is $1,138.33. note that the coupon frequency (semi-annual) changes the YTM that can be used when calculating the bond price.

c. Now suppose the bond trades at $1200 today. Write down the equation which you need to solve to find the YTM. What is the YTM? try to solve the equation in Excel using a semi-annual yield somewhat below 1%.

d. Suppose the yield to maturity (YTM) of the bond changes to 3.5% APR with semi-annual compounding. What is the new price of this bond today?