a)A 6 year bond was originally issued one year ago with a face value of $100 and a rate of 6%. The value at the 6% rate with 5 years remaining would be $74.73. If we suppose that the interest rates have changed to 5% since it was originally issued, what will be the revised price of the bond?

b) Clark Kent is interested in investing some of his savings in corporate bonds. His financial planner has suggested the following bonds:

-Bond A has a 7 percent annual coupon, matures in 12 years, and has a $1,000 face value.

- Bond B has a 9 percent annual coupon, matures in 13 years, and has a $1,000 face value.

- Bond C has an 11 percent annual coupon, matures in 12 years, and has a $1,000 face value.

Each bond has a yield to maturity of 9 percent.

1.Without calculation, indicate whether each bond is trading at a premium, discount, or at par.

2.Which Bond is Kent likely to choose and why?

3.If Kent's financial advisor forecasts an increase in the market interest rate by 200 points next year then what now should be Kent's decision? Give reasoning.

c) The Kensington Corporation issued a new series of bonds on January 1, 1997. The bonds were sold at $1,000 par, had a 12% coupon, and to mature in 30 years on December 31, 2026. Coupon payments are made semiannually (on June 30 and December 31).

1.What should have been the Yield to Maturity on the date the bonds were issued?

2.What was the price of the bonds on January 1, 2002 (5 years later), assuming that interest rates had fallen to 10%?