Bond Characteristics and Valuations a. What is the value of a 1-year, $1000 par value bond with a 10% annual coupon if its required rate of return is 10%? What is the value of a similar 10-year bond? b. For the bonds described in part (a), what would the value be if, just after it had been issued, the expected inflation rate rose by 3 percentage points, causing investors to require a 10% return? c. Suppose you could buy, for $1000, either a 10%, 10-year annual payment bond or a 10%, 10-year semi-annual payment bond. They are equally risky. Which would you prefer? If $1000 is the proper price for the semi-annual bond, what is the proper price for the annual payment bond? d. Suppose a 10-year, 10% semiannual coupon bond with a par value of $1000 is currently selling for $1135.90. (1) Calculate the yield to maturity. (2) However, the bond can be called after 5 years for a price of $1050. Calculate the yield to call. (3) If you owned this bond, do you think you would be more likely to earn the YTM or the YTC