1. A $1,000 bond has a 5 percent coupon and matures in ten years. What is the price of the bond if the comparable interest rate is 7 percent, 5 percent, or 3 percent?

1. A $1,000 bond is selling for $857. If the bond pays $40 annually and matures after six years, what is the yield to maturity?
2. You purchase a 7 percent, $1,000 bond for $1,222. The bond matures after 20 years. What is the current yield? What can you conclude occurred after the bond was issued? Confirm your answer to the previous question.
3. A $1,000 bond has a 5 percent coupon and matures after eight years. The bond is currently selling for $881. By how much does the yield to maturity exceed the current yield? Why are the yields different?
4. What is a zero coupon bond's price if the bond matures in seven years and the current rate on comparable bonds is 7 percent? What will be the appreciation over the next year if interest rates decline to 6 percent?
5. A $100 perpetual preferred stock pays a $5 annual dividend. What should be the price of the stock if the yield on other preferred stocks is 8 percent? If the preferred stock has to be retired after ten years, what should be the price of the stock?
6. A noncallable $1,000 bond has a coupon of 8 percent and the callable $1,000 bond has a coupon of 8 percent. Both bonds mature after 20 years, but the callable bond may be called after ten years. If interest rates are 9 percent and expected to remain at that level, what should be the price of each bond? If interest rates are 6 percent and expected to remain at the level, what should be the price of each bond?