PLEASE SHOW ALL WORK FOR FULL CREDIT ANSWERS TO QUESTIONS ARE BELOW..

1. (calculating the present value of a bond) If a corporate bond with a face value of $1,000 has 10 years to go until it matures, has a coupon interest rate of 6% and a yield to maturity (YTM) of 8%, what should be its price in the bond market (ie, PV)?

2. (calculating the current yield of a bond) If a corporate bond with a face value of $1,000 has 10 years to go until it matures, has a coupon interest rate of 6% and a market price of $865.80, what is its current yield?

3. (calculating the YTM of a bond) If a corporate bond with a face value of $1,000 has 10 years to go until it matures, has a coupon interest rate of 6% and a market price of $865.80, what is its yield to maturity (YTM)?

4. (calculating the YTC of a bond) Assume a callable corporate bond with a face value of $1,000, a coupon interest rate of 6%, a market price of $865.80, and a call premium of 8%. Assume also that the bond has 10 years to go until it matures, but it is callable after 8 years. What is the bonds yield to call (YTC)?

5. (calculating the present value of a bond with semi-annual coupon interest payments) If a corporate bond with a face value of $1,000 has 8 years to go until it matures, has a coupon interest rate of 6%, paid semiannually, and has a yield to maturity (YTM) of 8%, what should be its price in the bond market (ie, PV)?

6. (calculating the YTM of a bond with semiannual interest payments) If a corporate bond with a face value of $1,000 has 8 years to go until it matures, has a coupon interest rate of 6%, paid semiannually, and has a market price of $883.48, what is its yield to maturity (YTM)?

7.Assume the real risk-free rate is 1%. Assume also that inflation is expected to be 1% in the coming year (year 1), 2% in the next year after that (year 2), and 3% in the year after that (year 3). Assume also that the default risk premium, the liquidity premium, and the maturity risk premium are 0%. Given these conditions, what would be the yield on three-year treasury bonds today?

Answers to numerical problems:

Question 1: $865.80

Question 2: 6.93%

Question 3: 8.00%

Question 4: 11.3%

Question 5: $883.48

Question 6: 8.0%

Question 7: 3.0%