After recently receiving a bonus, you have decided to add some bonds to

your investment portfolio. You have narrowed your choice down to the

following bonds $($assume semiannual payments$)$:

a$.$ Using the PrICE function, calculate the intrinsic value of each bond.

Are any of the bonds currently undervalued? How much accrued

interest would you have to pay for each bond?

b$.$ Calculate the current yield of each bond. Is this the total return that

you would earn each year? If you were on a fixed income, would you

care about this number?

c$.$ Using the YIEld function, calculate the yield to maturity of each

bond using the current market prices. How do the YTMs compare to

the current yields of the bonds?

d$.$ Calculate the duration and modified duration of each bond. Create a

chart that shows both measures versus term to maturity. Does duration

increase linearly with term? If not, what relationship do you see?

e$.$ Which bond would you rather own if you expect market rates to fall

by $2\%$ for all bonds? What if rates will rise by $2\%?$ Why?