PRICING BONDS WITH SEMI-ANNUAL COUPON PAYMENTS -

(a) Calculate the price of a 4 percent coupon (annual coupons), $100 face value, 2-year bond if the coupon is paid semi-annually and the six-month discount rate is 3 percent. Calculate your actual return if you hold this bond for one year and the discount rate does not change. (INCLUDE FORMULAS USED TO SOLVE PROBLEM).

PRICING BONDS AT A DISCOUNT -

(b) Calculate the price of a 5 percent coupon (annual coupons), $1,000 face value, 5-year bond if the appropriate discount rate is 3 percent. Show your return if you hold this bond for two years and its discount rate doesn't change. (INCLUDE FORMULAS USED TO SOLVE PROBLEM).

PRICING ZERO COUPON BONDS -

(c) Calculate the price of a zero coupon, $1,000 face value, 20-year bond if the appropriate annual discount rate is 8 percent. Calculate your total return if you hold this bond for five years and the discount rate does not change. (INCLUDE FORMULAS USED TO SOLVE PROBLEM).