Problem 3.

The current price of a 9.75% coupon bond with 20 years to maturity is $1318, what is the YTM?

If the bond contains a call provision that allows the company to call the bond for $1050 7-years from now, what is the YTC? Based on the available information, is this bond likely to be called?

Problem 4.

Find the price of a 20-year zero coupon bond if the required return on such a bond was 12%? What if the required return was 10%? P

Problem 5.

Ten years ago you purchased a 30-year 9% coupon bond. At that time, the market rate of interest was 6.5%. Today, you sell the bond (the current market rate of interest is 10.5%).

5a. How much did you pay for the bond when you purchased it 10 years ago?

5b. How much can you sell the bond for today?

5c. What rate of return did you earn on your investment over the 10-year period that you held the bond?