6. You decide you want to experiment a little with investing in bonds. Your grandma gives you $1,000 at graduation and you want to put it away in a safe place. You find a government bond to buy. The bond will mature in 5 years and pays a coupon once a year.

a. (2 points) If the Annual Coupon Rate is 5%, what is your coupon payment?

b. (3 points) If you assume that the annual discount rate is 4% compounded annually, how much is the bond worth today?