Question 4. Assume that on 31 December 2019 Merck issued $100,000,000 of 20-year bonds with a coupon interest rate of 6%. They were issued to yield 6.2%. The bonds pay interest semiannually on June 30 and December 31.

1. How much cash did Merck receive from the issuance of these bonds?
2. Assume you purchased 10 of the $1,000 face amount bonds from this issuance and that interest rates fell from 6.2% to 5% over the next 6 months. If you sold the bonds at that point, how much capital gain or loss would you experience?
3. Assume instead that you hold the 10 bonds to maturity. What rate of return will you earn over the life of the bonds?
4. Finally, assume that Merck has the option of calling the bonds after 10 years at 110% of their face value. Calculate the yield to call for this bond issue.