Important note: Solve the following THREE questions by using the excel sheet on your computer, then copy the tables which you created and paste them on a word document. Print your word document and submit your results on the submission date.

Question One: If a bond pays $1500 in one year and $2500 in two years, its present value is $2800. Find the interest rate which equates the price of the bonds with the future values discounted. Use in your experiment 10 interest rates (hint: start your calculation from interest rate =20% to 30%). (1.5 points)

Question Two: Find the prices of a 10% coupon bond with a face value of $4000 on the following yield to maturities: 0.12, 0.11, 0.10, 0.09, and 0.08, and 4 years to maturity. Calculate the interest rate at each price. Further, write down the formula of the present value for this question. (1.5 points)

Question Three: based on your results in questions 1 and 2 (2 points) 1) Write down the formula of the present value for questions 1 and 2.

2) What is the relationship between the interest rate and the price of the bond?

3) What is the relationship between yield to maturity and interest rate in question 2?