Decimal places (when relevant): please keep 2 in all calculations. For interest rates, keep 2 digits in the form of 3.xx% unless otherwise specified.

PLEASE SHOW ALL WORK! WITHOUT FINANCIAL CALCULATOR and NO EXCEL

If you are not going to answer all the parts to the question please leave it for someone else. THANKS

1. a. The yield to maturity of a $1,000 bond with a 5 percent coupon rate, semiannual coupons, and two years to maturity is 6%.

1. What interest (coupon) payments would bondholders receive each year?
2. At what price does the bond sell?

(iii) What will happen to the bond price if the yield to maturity increases to 7 percent?

2. How much should you pay for a $1,000 bond with 8 percent coupon, annual payments, and five years to maturity if the interest rate is 5 percent?

3. A perpetual bond has annual coupon payments of $45 and the required return today is 5 percent, at what price does the perpetual bond sell?

4. What is the price of an 11-year, zero-coupon bond paying $1,000 at maturity if the YTM is 5.5 percent? (Assume semi-annual compound interest)