5. What kind of bond can the issuer retire before maturity?

a. Callable bond

b. Discount bond

c. Zero

d. Puttable bond

6. Consider a bond with 3 years to maturity and a coupon of 5%. The term structure is flat and the bonds yield to maturity is 3%. Assume the bonds face value is $1,000 and that it pays annual coupons. Calculate the price of the bond.

a. $1,034.91

b. $1,056.97

c. $1,056.57

d. $938.18

7. Considering the same bond in the prior question, suppose at the end of the first year that interest rates increase to 4%, calculate the price of the bond at the end of the first year.

a. $1,018.86

b. $1,027.75

c. $1,038.27

d. $1,019.04