Answer the next 3 questions (i.e., Q15, Q16 and Q17) using the information below. Assume that you are considering the purchase of a 20-year bond with annual coupon of 8.5%. The bond has a face value of $1000 and makes annual interest payments. If you require an 10.5% yield on this investment:

15. What is the maximum price you are willing to pay for the bond?

16. Your desired total wealth at the end of 20 years if you purchased this bond will be? And how much did you earn in additional interest if you reinvested each coupon payment at 10.5% for the entire 20 years? Show work in the space below.

17. Verify that your realized yield at the end of 20 years is the same as the bonds yield to maturity of 10.5%. What are the key risks in bond investments?