1. A corporation has an outstanding bond with the following characteristics:

Coupon rate	8.0%
Interest payments	Semi-annually
Face value	$1,000
Years to maturity	18
Current market value	$925.24

Find the yield to maturity (YTM) for this bond.

2. Rick bought a 20-year bond when it was issued by Macroflex Corporation 5 years ago (NOTE: the bond was issued 5 years ago. In calculating price today, remember it has only 15 years remaining to maturity). The bond has a $1,000 face value, an annual coupon rate equal to 7 percent and the coupon is paid every six months. If the yield on similar-risk investments is 5 percent,

a. What is the current market value (price) of the bond?

b. Suppose interest rate levels rise to the point where such bonds now yield 9 percent. What would be the price of Macroflex bond?

c. At what price would Macroflex bonds sell if the yield on them was 7 percent?

d. What do you observe regarding the relationship between interest rate (YTM) bonds price?

e. What do you observe regarding the relationship between coupon, YTM and the bonds price?