Default-free bonds consider a default-free pure discount bond with par value $1,000 maturing in 15 years. a) If the market rate is 4% APR semi-annual, what is the PV of the bond? Suppose the bond were currently traded at $500. What would be the bond's YTM at this price? If the market rate is 4% APR semi-annual, could this be an equilibrium price? If not, what is your prediction about how the price would move? 2. Consider the following information of about a bond: Issue date: 1/29/18 (today) Par value: $1,000 Coupon rate: 6% semi-annual First payment date: 7/29/18 Maturity date: 1/28/20 Use the table below to describe, as of 1/29/18, the future payments the bond issuer will make to the bondholder (leave any superfluous cells blank). 1/29/18 Date Payment a) Suppose the market rate is 6% APR semi-annual, what is the bond price on 1/29/18? b) Suppose the market rate were to rise to 7% APR semi-annual overnight, what would be the bond price tomorrow? Would it be above or below the bond's par value, and what would such a bond be called? c) The fact that changes in the market rate cause changes in bond prices is called: risk. d) What causes changes in the market rate for default-free bonds