Please show your work so I can learn from this :)

1. A $1,000 bond has a coupon rate of 8 percent and matures after ten years. What is the current price of the bond if the comparable rate of interest is 10 percent?

2. A $1,000 bond has a coupon rate of 10 percent and matures after eight years. Interest rates are currently 7 percent.

a) What will the price of this bond be if the interest is paid annually?

b) What will the price be if investors expect that the bond will be called with no call penalty after two years?

c) What will the price be if investors expect that the bond will be called after two years and there will be a call penalty of one years interest?

d) Why are your answers different for questions (a), (b), and (c)?

3. If a $1,000 bond with a 9 percent coupon (paid annually) and a maturity date of ten years is selling for $939, what is the current yield and the yield to maturity?

4. A $1,000 zero coupon bond sells for $519 and matures after five years. What is the current yield and the yield to maturity?

5. What should be the prices of the following preferred stocks if comparable securities yield 6 percent, 8 percent, and 10 percent?

a) MN Inc., $4 preferred ($100 par).

b) CH Inc., $4 preferred ($100 par with the additional requirement that the firm must retire the preferred after 20 years).

Why should the prices of these securities be different?

6. Company X has the following bonds outstanding:

Bond A Bond B

Coupon 8% Coupon Variable- Changes annually to be comparable to the current rate

Maturity 10 years Maturity 10 years

Initially, both bonds sold at $1,000 with yields to maturity of 8 percent.

a) After two years, the interest rate on comparable debt is 10 percent. What should be the price of each bond?

b) After two additional years (i.e., four years after issue date), the interest rate on comparable debt is 7 percent. What should be the price of each bond?

c) What generalization may be drawn from the prices in questions (a) and (b)?

7. Tinker Spy Corp. has a high-yield junk bond with the following features:

Principal $1,000

Coupon 0% for years 1 through 5 and 10% for years 6 through 10

Maturity 10 years

The current interest rate on comparable debt is 10 percent. If you expect that the interest rate will be 8 percent five years from now, what is your potential gain or loss if your expectation is correct and interest rates are 8 percent after 5 years?

8. An extendable bond has the following features:

Principal $1,000

Coupon 9.5% ($95 annually)

Maturity 8 years but the issuer may extend the maturity for 5 years

a) If comparable yields are 12 percent, what will be the price of the bond if investors anticipate that it will be retired after eight years?

b) What impact will the expectation that the bond will be retired after 13 years have on its current price if comparable yields are 12 percent?

c) If comparable yields remain 12 percent, would you expect the firm to retire the bond after eight years?

9. Compute the duration for bond C, and rank the bonds on the basis of their price volatility. The current rate of interest is 8 percent, so teh prices of bonds A and B are $1,000 and $1,268, respectively.

Bond A Coupon 8% Term 10 years Duration 7.25

Bond B Coupon 12% Term 10 years Duration 6.74

Bond C Coupon 8% Term 5 years Duration ?

Confirm your ranking by calculating the percentage change in the price of each bond when interest rates rise from 8 to 12 percent. (Bond A's and B's prices become $774 and $1,000, respectively.)

10. A ten-year bond with a 9 percent coupon will sell for $1,000 when interest rates are 9 percent. What is teh duration of this bond? Using duration to forecast the change in the price of the bond, calculate the difference between the forcasted and the actual price change according to the bond caluation model for the following interest rates. 9.2, 9.4, 9.6, 9.8, 10, 10.5, 11, and 12 percent.