$3.$ What is reinvestment rate risk? Which has more reinvestment rate risk, a $1-$year bond or a $10-$

year bond?

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$4.$ The Select Company has two bond issues outstanding. Both bonds pay $$80$ annual interest

plus $$1,000$ at maturity. Bond L$-$Series has a remaining maturity of $15$ years, and Bond SSeries a remaining maturity of $1$ year.

a$)$ What will be the value of each of these bonds when the going rate of interest is $(1)4\%$

and $(2)14\%?$

b$)$ What is the percentage change in the value of each bond when the interest rate

increases from $4\%$ to $14\%?$

c$)$ Why is there a greater percentage change for the longer$-$term bond L series?

$5.$ What is interest rate risk? Which bond has more interest rate risk, an annual payment $1-$year

bond or a $10-$year bond? Why?

$6.$ SOP Ltd bonds have a par value of $$1,000$ and pay semi$-$annual interest of $$55.$ The bonds

were issued on July $1,2015,$ with a $30-$year maturity. How much would you pay for SOP$$s

bond on December $31,2027,$ if your required rate of return is $10\%?$

$7.$ A $10-$year bond series, issued January $1,2018,$ pays semi$-$annual coupons at a rate of $12\%$

per annum with a par value of $$1,000.$ What is the bond$$s yield to maturity on July $1,2022,$

given that the bond is selling for $$1,100?$ What is the current yield based on this price?

$8.$ Why would a firm wish to call a bond before its maturity date?