a. The yield to maturity of a $1,000 bond with a 6.9% coupon rate, semiannual coupons, and two years to maturity is 7.9% APR, compounded semiannually. What is its price? The price bond is $____.

b.Suppose a ten-year, $1,000 bond with an 8.8% coupon rate and semiannual coupons is trading for $1,035.87.

a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)?

b. If the bond's yield to maturity changes to 9.6% APR, what will be the bond's price?

C. Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of $1,000, and a coupon rate of 7.6% (annual payments). The yield to maturity on this bond when it was issued was 5.9%. What was the price of this bond when it was issued? When it was issued, the price of the bond was $____.

D. Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 5.5%. You hold the bond for five years before selling it.

a. If the bond's yield to maturity is 5.5% when you sell it, what is the annualized rate of return of your investment?

b. If the bond's yield to maturity is 6.5% when you sell it, what is the annualized rate of return of your investment?

c. If the bond's yield to maturity is 4.5% when you sell it, what is the annualized rate of return of your investment?

d. Even if a bond has no chance of default, is your investment risk free if you plan to sell it before it matures? Explain.