Paragraph Style 2. Why should investors be cautious when relying on yield to maturity? Is it a convenient measure of rate of return for investors who might not hold their bonds to maturity? Make references to the relevant types of risk when making investments in bonds 3. What might have caused investors to rationally stay away from long-term bonds even when the yield curve is upward-sloping? B. Calculation questions 1. A government bond issued in Germany has a coupon rate of 5%, face value of euros 100 and maturing in five years. The interest payments are made annually. Calculate the price of the bond (in euros) if the yield to maturity is 3.5% 2. Explain how 1.5% change in required yield would influence the price of the bond in the above question. 3.A three-year bond has 8.0% coupon rate and face value of $1000. If the yield to maturity on the bond is 10%, calculate the price of the bond assuming that the bond makes semi-annual coupon interest payments 4. Consider the following term structure of interest rates: r1-59b.r2 796,7.3-10% a. Find the prices of the following bonds: i, 3-year zero-coupon bond with face value of $1,000 ii. 2-year bond with coupon rate 15% and par of $100 (paying coupons annually) iii. 3-par bond with coupon rate 7% and par of $1,000 (paying coupons annually) b. Find out whether the following bonds are fairly priced: 1. 2-year strip with $1,000 principal that has an observed price of $873.44 il.3-year bond with coupon rate of 15% paying annually and S100 par has an observed price of $93.88 w. 2-year bond with coupon rate 5% paying annually, face value of $1,000 that has an obseryd price of $1,097.54 c. Discuss the magnitude of YTM for each of the 6 bonds above and explain how you would calculate the YTM for each bond (no requirement for calculating the YTM for this question only explain how you would find the YTM for each bond) Paragraph Style 2. Why should investors be cautious when relying on yield to maturity? Is it a convenient measure of rate of return for investors who might not hold their bonds to maturity? Make references to the relevant types of risk when making investments in bonds 3. What might have caused investors to rationally stay away from long-term bonds even when the yield curve is upward-sloping? B. Calculation questions 1. A government bond issued in Germany has a coupon rate of 5%, face value of euros 100 and maturing in five years. The interest payments are made annually. Calculate the price of the bond (in euros) if the yield to maturity is 3.5% 2. Explain how 1.5% change in required yield would influence the price of the bond in the above question. 3.A three-year bond has 8.0% coupon rate and face value of $1000. If the yield to maturity on the bond is 10%, calculate the price of the bond assuming that the bond makes semi-annual coupon interest payments 4. Consider the following term structure of interest rates: r1-59b.r2 796,7.3-10% a. Find the prices of the following bonds: i, 3-year zero-coupon bond with face value of $1,000 ii. 2-year bond with coupon rate 15% and par of $100 (paying coupons annually) iii. 3-par bond with coupon rate 7% and par of $1,000 (paying coupons annually) b. Find out whether the following bonds are fairly priced: 1. 2-year strip with $1,000 principal that has an observed price of $873.44 il.3-year bond with coupon rate of 15% paying annually and S100 par has an observed price of $93.88 w. 2-year bond with coupon rate 5% paying annually, face value of $1,000 that has an obseryd price of $1,097.54 c. Discuss the magnitude of YTM for each of the 6 bonds above and explain how you would calculate the YTM for each bond (no requirement for calculating the YTM for this question only explain how you would find the YTM for each bond)