question a) at the end. thanks!

Analytical Questions 1) Present Value and Yield to Maturities a) Assume someone promises to pay you $5,000 two years from now. What must the discount rate (interest rate) be for you to be indifferent between that and being payed $3,500 today. discount rate = 12 Sooo 3500 19.52% 0.195228609 b) What is the return on capital on a 10 percent coupon bond that initially sells for $1,000 and sells for $1250 next year? What is the overall yearly return? 12 50 - 1000 25% 25 + 10 = 35% IODO Return on auerall return c) Ifa S1000 face value coupon bond has a coupon rate of 10 percent, a maturity of 2 years and a yield to maturity of 3%. What is its price? Price 100 100 LOOO + + 1.03 (1.0372 (1.03)2 = 91.08737864 + 94.25954091 + 942.5959091 = $ 1133.94 a. If you assumed that there was a 0% chance that you would not receive the coupon payments each year but a 15% chance that the bond would not pay its face value in 2 years, what would happen to the price of the bond. Extra Credit: What is the price of the bond? 2