Provide your answers in the space provided or the back of the page. Make sure to scan all work pages.

Any quantitative questions require showing your work for full credit.

Round all $ problems to the nearest cent.

All interest rate problems must be carried at least 5 decimal places and left in % form.

Formulas from class must be utilized and financial calculator answers will not be accepted.

1. Suppose you are holding a $25,000 deep discount bond that initially had 25 years to maturity.

Calculate the initial and current price of this bond if 12 years later you must sell the bond and market interest rates have

risen from 5.51 to 7.77%.

Compare your actual rate of return with the rate of return you expected when you purchased the instrument.

Explain how the returns would have been different if this had been a 20 year instrument initially. Your explanation should be

supported by your calculations.

Explain what would have happened if you had initially purchased a 10 year instrument.