1. Consider two bonds, Bond A and Bond B, both with a coupon rate of 10 percent and a yield to maturity of 10 percent. These are standard bonds with semiannual coupon payments. Bond A matures in 5 years; Bond B matures in 10 years. What is the price of each bond?

2. Consider the bonds in question 5. Suppose interest rates decline, causing the yield to maturity for each bond to immediately decline to 9 percent. What is the new price of each bond? (Hint: Consider the semiannual yield to maturity.)

3. Consider two bonds, Bond C and Bond D, both with a yield to maturity of 10 percent and with 5 years to maturity. These are standard bonds with semiannual coupon payments. Bond C has a coupon rate of 10 percent (with semiannual coupon payments); Bond D does not pay any coupons (i.e., it a zero-coupon bond). What is the price of each bond?

4. Consider the bonds in question 7. Suppose interest rates decline, causing the yield to maturity for each bond to immediately decline to 9 percent. What is the new price of each bond? (Hint: Consider the semiannual yield to maturity.)

5. Suppose a preferred share pays perpetual quarterly dividends of $1.00 and has a per annum dividend yield of 8 percent. What is the fair value of this preferred share?

6. What is the fair value today of a common share with expected annual dividends of $1.00, $1.05, and $1.10 in each of the next three years and an expected share price of $20 in three years, assuming a required return of 9 percent?

7. What is the value of a common share with an expected perpetual stream of annual dividends, with the first dividend of $2.00 to be received in one year and with all subsequent dividends growing at a rate of 5 percent, assuming a required rate of return of 12 percent?