he rate that makes the present value of the cash flows of a bond equal to its price is called

Question 7 options:

	Discount yield
	Yield to maturity
	Zero coupon rate
	Risk free rate
	Par rate

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Question 8 (15 points)

Recall that the Par Rate is the coupon rate such that a bond sells at par. A company wants to issue a 2 year bond with annual payment that sells at par. Assume R(0,1) = 4% and R(0,2)= 6%.The coupon rate should be set at

Question 8 options:

	4%
	7.3%
	5.94%
	6.21%

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Question 9 (15 points)

Consider the following US treasury rate table.

Maturity	Yield	Yesterday	Last Week	Last Month
6 Month	0.02	0.02	0.02	0.09
1 Year	0.23	0.23	0.22	0.23
2 Year	0.73	0.7	0.71	0.71
3 Year	1.04	1.03	0.99	1.07
5 Year	1.51	1.51	1.47	1.59
10 Year	2.18	2.19	2.13	2.2
30 Year	2.95	2.95	2.89	2.84

What is the yield to maturity of a 2 year 5% bond with annual payments?

Question 9 options:

	.4837
	.7182
	.2323
	.7321

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Question 10 (15 points)

What is the price of B(0,3)?

Zero Coupon rates
R(0,1)	4.5562%
R(0,2)	5.2706%
R(0,3)	6.0745%

Question 10 options:

	0.8379
	6.0745
	.8887
	1