Question 1: Answer each part to understand the concept. Use Excel as necessary and be sure to include cell references/formulas.

Part 1: What is the price of a Microhard 25-year, zero coupon bond paying $1,000 at maturity, assuming semiannual compounding, if the YTM is 6%, 8%, and 10%?

Part 2: Microhard has issued a bond with the following characteristics: Par = $1,000, Time to maturity = 18 years, Coupon rate = 7%, semiannual payments. Calculate the price of this bond if the YTM is: 5%, 7%, and 9%.

Part 3: You find a Microhard zero coupon bond with a par value of $10,000 and 24 years to maturity. If the YTM on this bond is 4.2 percent, what is the dollar price of the bond? (Assume semiannual compounding periods).

Part 4: Put Microhard aside now. Instead, youre looking at Treasury bills that are currently paying 4.6 percent and the inflation rate is 1.9 percent. What is the approximate real rate of interest? The exact real rate?