A $1,000 maturity value bond currently has 15 years left to maturity.The

bond has an 8.5% coupon rate and pays interest annually.

(5)a.If you want to earn a 7% rate of return, how much would you be willing

to pay today for this bond?

(5)b.Suppose you buy the bond for the value you calculated in part a.After

holding the bond for 2 years and receiving 2 interest payments, you sell the bond for $1,032.43.What annual, compound rate of return have you earned over this 2 year period?Prove your answer by showing that PV get equals PV give up.

(5)c.Suppose you buy the bond for the value you calculated in part a.After

holding the bond for 2 years and receiving 2 interest payments, you sell the bond.What price must you receive (at time 2) if you now want to receive a 10% rate of return?

(5)d.Suppose you buy the bond for the value you calculated in part a.After

holding the bond for 6 years and receiving 6 interest payments, the bond defaults with no chance of paying you anything more.What annual, compound rate of return have you earned over this 6 year period?