A bond has the following terms: January 1, 2000, settlement date January 1, 2020, maturity date 10 percent semiannual coupon 12 percent yield $100 redemption value Frequency is semiannual 30/360 basis =PRICE("1/1/2000","1/1/2020",10%,12%,100,2,0)=84.954

Bond Problems 1. Calculate the price of a 20-year 10% coupon bond with a par value of $1,000. The bond should be price to provide a yield to maturity of 11%. Interest payments are paid semiannually.

2. Calculate the price of a 20-year 10% coupon bond with a par value of $1,000 if the yield to maturity is 9%. Interest payments are paid semiannually.

3. Calculate for each of the bonds below the price per $1,000 of par value assuming semiannual coupon payments.

Bond Coupon Rate Years to Maturity Required Yield

A 8% 9 7%

B 9% 20 9%

C 6% 15 10%

D 0% 14 8%

4. Consider a bond selling at par with a coupon rate of 6% and ten years to maturity. What is the price of this bond if the required yield is 15%? What is the price of this bond if the required yield increases from 15% to 16%, and by what percentage did the price of this bond change? What is the price of this bond if the required yield is 5%? What is the price of this bond if the required yield increases from 5% to 6%, and by what percentage did the price of this bond change? What can you say about the relative price volatility of a bond in high compared to low interest rate environments?

5. Show the cash flows for the four bonds below, each of which have a par value of $1,000 and pays interest semiannually. Calculate the yield to maturity for the four bonds.

Bond Coupon Rate Years to Maturity Price

W 7% 5 $884.20

X 8% 7 $948.90

Y 9% 4 $967.70

Z 0% 10 $456.39