1. JRJ Corporation recently issued 10-year bonds at a price of $1,000. These bonds pay $60 coupon every six months. Their price has remained stable since they were issued, i.e., they still sell for $1,000. Due to additional financing needs, the firm wishes to issue new bonds that would have a maturity of 10 years, a par value of $1,000, and pay $40 coupon every six months. If both bonds have the same yield to maturity, approximately how many shares of new bonds must JRJ issue to raise $2,000,000 cash?

1. 2,400
2. 2,596
3. 3,050
4. 5,000
5. 4,275
6. None of the above (state your answer)

2. Xerox Corp. bonds bearing an annual coupon rate of 8%, pay coupons semiannually, have 10 years remaining to maturity, but callable in 2 years from now at $1,100. It is currently priced at $1,168.54 per bond. What is the Xerox Corp. annual yield to call?

A) 0.38%

B) 2.00%

C) 3.50%

D) 4.00%

E) 7.00%

F) None of the above (state your answer)