Answer:

2. Assume that you have a 3% coupon bond with a faoe yalue of $21 and two years to maturity. For ALL the questions below, show your calculations. E show equations not calculator buttons.) [Note that equations can be typed. E: W = CF2t{1+i)2] a. How much are you willing to pay for this bond if market interest rates are 2%? b. Assume that you need to sell the bond again after 1 year. You get $1,95 for the bond. Calculate your rate of return. Give your answer in percent c. Giyen the info aboye. what do you think happened to market interest rates oyer the year? Are market rates below or above 2% at the time you sell? Explain briey