Q1. A 4-year 6.8% coupon bond is selling to yield 7%. The bond pays interest annually. One year later interest rates decrease from 7% to 6.2%.

2.1. What is the price of the 4-year 6.8% coupon bond selling to yield 7%?

2.2. What is the price of this bond one year later assuming the yield is unchanged at 7%?

2.3. What is the price of this bond one year later if instead of the yield being unchanged the

yield decreases to 6.2%?

2.4. What will be the price change attributable to moving to maturity (pull to par)?

2.5. What will be the price change attribute to an increase in the discount rate from 7% to

6.2%?