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

8. Assume that a bond has a coupon rate of 10 percent, makes annual coupon payments, and has a par value of $1,000. Calculate the bonds value under the following conditions.

a. The bond matures in 5 years and the YTM is 5%:

b. The bond matures in 5 years and the YTM is 10%:

c. The bond matures in 5 years and the YTM is 15%:

d. The bond matures in 15 years and the YTM is 5%:

e. The bond matures in 15 years and the YTM is 10%:

f. The bond matures in 15 years and the YTM is 15%:

9. Looking at the prices that you calculated in problem 8, what effects do time and YTM have on a

bonds price?

10. Calculate the single and annual coupon payments assuming the following:

a. Semiannual bond, Coupon rate of 8 percent, Par value of $1,000:

b. Annual bond, Coupon rate of 4.5 percent, Par value of $100:

c. Monthly bond, Coupon rate 12 percent, Par value $850