Q3:

(a) Suppose you purchase a 20-year, zero-coupon bond with a yield to maturity of 10%. For a face value of $800, the bond will initially trade for

(b) If the bonds yield to maturity change to be 12%, what will its price be five years later?

Cranston Industries just issued $1,000 par 30-year bonds. The bonds sold for $1,107.20 and pay interest semi-annually. Investors require a rate of 7.75% on the bonds. What is the bonds' coupon rate?

(c) If you purchased the bond at $118.91 and sold it 5 years later, what would the rate of return of your investment be?