A zero-coupon bond matures in 15 years. At a market discount rate of 4.5% per year and assuming semi-annual compounding, what is the price of the bond?

You sold the zero-coupon bond in the question above with exactly 7 years left to maturity when the market discount rate for such a security is 3.5%, what is the taxable gain for this bond?

Analyze the following Treasury note & bond quotes from April 10, 2014.

Maturity(yrs)	Coupon	Bid	Asked	Change	Asked Yield
1	0.250	100.0391	100.0547	-0.0156	0.037
5	1.125	98.4609	98.4766	-0.0625	1.439
10	6.875	146.0859	146.1016	+0.0469	1.935
30	2.500	98.2813	98.3125	+0.2109	2.582

a. Plot the yield vs. price curve for each (best done in Excel).

b. Which bond has lowest price sensitivity? Which has the highest?

c. Which bond would you purchase if you thought the yield curve would increase by 100bps within the next year?