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. Determine the annual return on a 12-year, $25,000 discount bond that you originally purchased for $15,700 and

sold 8 years later for $22,500.

2. Do both of the following

a) A $50,000 coupon bond with a $2,750 coupon payment every year has a coupon rate of?

b) With an interest rate of 6.45 percent, the present value of $75,000 in four years is?

3. Determinethe current yield AND the approximate yield to maturity for a 6.32%, $500,000 coupon bond selling

for $512,600 and maturing in 6 years.

4. Determine the market price of a 12-year, 5.15%, $150,000 coupon bond when the market interest rate is 5.75%.

Note: you must use the pricing formula from class. Do not use 12 different terms.

5. What was the return on a 15-year, 7.85 %, $250,000 coupon bond that was purchased one year ago for $245,000

and just sold for par?

6. Determine the original loan value loan amount for someone agreeing to make annual year end payments of

$25,000/year for the next 20 years. Note: you must use the pricing formula from class. Do not use 20 different terms.

7. Suppose that you are a saver with a choice of three financial assets that are identical in every way except their

nominal interest rate and taxability. Calculate the after tax real yield for each of the following three assets and

choose which of the three assets is the best option if inflation is expected to be 1.75% annually with a federal

income tax rate of 30%.

Asset 1: A corporate bond with an interest rate 5.5% in a state with an income tax rate of 5.5%.

Asset 2: A Treasury bond with an interest rate 4.25% in a state income tax rate of 0%.

Asset 3: A municipal bond with an interest rate 4.0% in a state with an income tax rate of 5.5%.