4. Draw a time line showing the cash flows for a bond that has a four year maturity, semiannual coupon payments, a coupon rate of 5 percent, and a par value of $1,000.

5. Using the information in question 4, value the bond under the following interest rate assumptions: a. Market Rate = 3% b. Market Rate = 5% c. Market Rate = 7%

6. Assuming the market rate is 6.5 percent, what is the value of a bond that pays an annual coupon payment, a coupon rate of 8 percent, a par value of $1,000, and a maturity of 10 years. a. Is the bond in question 6 selling for a discount, premium, or par?

7. Find the yield to maturity (YTM) for a bond with the following characteristics:

Maturity = 15 years, Coupon Rate = 10%, Coupon Payments made Annually, Par = $1,000. a. Bond Selling Price = $1,125 b. Bond Selling Price = $1,000 c. Bond Selling Price = $975