Q1.)

a.Several years ago, Castles in the Sand Inc. issued bonds at face value of $1,000 at a yield to maturity of 6.4%. Now, with 6 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 12%. What is the price of the bond now? (Assume semiannual coupon payments.)(Do not round intermediate calculations. Round your answer to 2 decimal places.)

Bond Price: ?

b.Suppose that investors believe that Castles can make good on the promised coupon payments but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 80% of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive?(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Yield to Maturity: ?

Q2.)What is the present value of the following cash-flow stream if the interest rate is 5%?(Do not round intermediate calculations. Round your answer to 2 decimal places.)

\fThe following table shows the prices of a sample of Treasury strips. Each strip makes a single payment at maturity. You! to Price. {% of Ellen Maturity value) 1 9?.?52% 2 94.251 3 90.444 4 86.330 a. What Is the 1-year interest rate? [Do not round Intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) mutate a b. What is the 2-year interest rate? {Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Intarastrate I I'll: c. What Is the 3-year Interest rate? {Do not round lntermedlate calculatlons. Enter your answer as a percent rounded to 2 decimal places.) mm. _% d. What Is the 4-year interest rate? {Do not round Intermediate calculations. Enter your answer as a percent rounded to 2 declmal places.) mm. _%